EPFO's Two-Day Meet: Key Proposals To Be Taken Up

The Central Board of Trustees of India's retirement-fund body is likely to discuss proposals pertaining to equity exposure, widening social security net, and pension system among others, during the two-day meet in Bengaluru on Friday and Saturday.

The meeting comes at a time when Employees’ Provident Fund Organisation's interest rate at 8.1% for year 2021-22 is at its lowest level in over four decades even as it looks to increase its surplus.

BQ Prime spoke to two government officials in the Ministry of Labour and Employment to understand what's on agenda. The officials spoke on the condition of anonymity as the matter is not public yet.

Here are the proposals that are likely to be taken up:

The Central Board of Trustees will discuss the proposal to increase its investments limit in equities to 20% in the first phase with an additional 5% in the second phase, from the current limit of 15%.

Rameshwar Teli, minister of state for Labour and Employment, in a written reply to Lok Sabha on July 18, said, "FIAC, a sub-committee of CBT and EPF, has recommended for the proposal to increase investment in equity and related investments in category IV of the pattern of investment from 5-15% to 5-20% for consideration of CBT, EPF."

EPFO had started investing 5% of its deposits in Exchange Traded Funds from August 2015. The limit was later raised to 10% and currently stands at 15%. As of March 31, 2022, the retirement-fund body's total investment corpus stands at Rs 1.7 lakh crore, of which over Rs 22,000 crore has been redeemed.

As of now, EPFO will invest in ETFs, one of the two government officials mentioned above said, adding that there is no proposal for a shift to other kind of stock investments.

A higher equity exposure is aimed at increasing the overall surplus so as to provide better interest rates to its subscribers.

Another issue likely to be taken up by the trustees is of bringing more employees under the EPFO net. This will be done by lowering the minimum number of workers employed by a firm to be eligible for coverage and increasing the salary limit up to which mandatory EPF benefits can be provided.

Currently, a firm with 20 or more workers is mandated to register under the EPFO. The proposal is to reduce this number to 10.

Adhering to a long-pending demand by labour unions, EPFO is also likely to discuss increasing the current monthly wage ceiling of Rs 15,000 to Rs 21,000 in order to include more workers. The Employees’ State Insurance Corporation also currently provides social security benefits to employees earning up to Rs 21,000.

The trustees will also consider a proposal for setting up a central pension disbursal system for crediting the payment in 73 lakh bank accounts at a time. Currently more than 138 regional offices of the EPFO credit pensions to beneficiaries in their region separately.