Labour Ministry has notified a new investment pattern for the Employees' Provident Fund Organisation (EPFO) which allows the body to invest 5 percent of its funds in exchange traded funds (ETFs).

"We will invest 5 percent of the investible funds of EPFO in the ETF (initially). The new investment pattern has been notified about two-three days ago," Labour Secretary Shankar Aggarwal told reporters here.

As per estimates, the EPFO's incremental deposits for 2014-15 would be around Rs 80,000 crore.
During the current fiscal, the incremental deposits could be around Rs 1 lakh crore as the body had increased the monthly wage ceiling for coverage under its social security schemes to Rs 15,000 from Rs 6,500 in September last year.

The overall corpus of EPFO at present stands at Rs 6.5 lakh crore, but the outstanding investible funds are worth about Rs 1 lakh crore. The quantum of investment in equities may increase in coming years.

Elaborating further, Aggarwal said, "We will begin by one percent and go up to five percent by the end of this financial year. They (EPFO) have to reach the figure of 5 percent by the end of this financial year."

He further said: "The Finance Ministry had advised us to invest 5-15 percent of corpus in equity market. We are  entering into the equity market for the first time, therefore, we are a little cautious.

"It is hard earned money of the employees. We cannot take that kind of risk (investing 15 percent of corpus in equity). By end of this fiscal year we will touch a figure of 5 percent."
Agarwal added "We have to begin investments in ETF only. We will decide how much proportion we will invest in PSU ETFs. If it is in the interest of workers then we will do that."

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