Employees Provident Fund - Investment details

Employees Provident Fund – Investment details

STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF LOK SABHA STARRED QUESTION NO. 213 FOR 27.08.2012 BY SHRI SANJAY BRIJKISHOR LAL NIRUPAM REGARDING EMPLOYEES PROVIDENT FUND ORGANIZATION.

(a): The details of Employees’ Provident Fund Organization (EPFO) funds invested in private sector, non-banking companies during the last three years and current year (up to 22.8.2012) and returns on these investments are given below:

[figures in Rupees in crore]

Year	Amount Invested	Average rate of return (%)
2009-10	578.43	8.87
2010-11	2,434.41	9.05
2011-12	1,163.59	9.67
2012-13 (as on 22.8.2012)	Nil	–

(b) to (d): Finance and Investment Committee (FIC) of Central Board of Trustees, Employees’ Provident Fund [CBT,EPF] is not the decision making body but only a recommending body to CBT, EPF for investment of EPFO fund. The CBT, EPF frames investment guidelines for investment decisions of EPFO within the pattern of investment prescribed by the Central Government.

FIC, in its 109th meeting held on 23rd May, 2012, had made following recommendation to the CBT, EPF for consideration:

A. Recommendation for changes in Pattern of Investment:

S.No	Recommendations	Reasons
1.	Allowing short term borrowings from Collateral Borrowing and Lending Obligation (CBLO).	Borrowing from CBLO will enable EPFO participation in Primary Auctions by RBI at times of mismatch of cash flows.
2.	Investment in Certificate of Deposits of Public Sector Banks.	Better cash management.
3.	Increasing the Maximum tenure of Term Deposit receipts of Public Sector Banks from existing upto 1 Year to Upto 5 Years.	Enable EPFO to capture higher yields on such investments.

B. Recommendation for changes in Investment Guidelines of CBT

S.No.	Recommendations	Reasons
1.	Consider expanding of Investment Universe for bonds of private sector Companies fulfilling the following criteria: a) Listed b) Dual AAA Rating c) 25% pidend during last 5 Years d) Continuous net profit during last 5 Years e) Positive Networth of minimum of Rs 5000 crore. f) The maximum tenure for investments in Private Sector non banking companies be uniformly restricted to maximum 10 years in place of existing maximum 15 years. g) There should be restriction in foreign shareholding of the eligible company.	Increasing the investment basket in the private sector companies category without compromising security and safety of the investments so as to realize higher yields.

These recommendations were considered by the CBT, EPF in its 200th meeting held on 7th August, 2012. The CBT, EPF after discussion, accepted the recommendations at ‘A’ above and decided to recommend the same for consideration of the Central Government. As regards recommendation under ‘B’ above, the CB, EPF decided to defer the decision with a direction to place the item again. The matter will be considered by the Government once proposal in this regard is received from the EPFO.