The labour ministry is likely to approve the changes in investment norms for the
Employees Provident Fund (EPF) in the next five-six days, according to Central PF Commissioner K K Jalan.
"They (the changes) are yet to be notified. The Central Board of Trustee (CBT) relaxed the norms, and it has gone to the labour ministry for approval. The secretary had a meeting recently, and the approval is almost through. Hopefully, in the next five-six days, the changes will get approval," Jalan told Money Today.
The CBT had relaxed the norms earlier this year. Once they are approved, the
EPF will be able to invest in longer duration public sector bonds.
At present, it can invest in AAA-rated PSU bonds with tenure up to 15 years. The new norms propose to increase this to 25 years.
Apart from this, the EPF will also be able to invest in AAA-rated corporate bonds of all companies. At present, it is allowed to invest only in bonds issued by government-owned companies and only seven private companies.
These changes could help
EPF generate higher returns.
"Now, our investment in government of India securities will go down. The investment in overall state securities may also come down, while our investment in public and private sector bonds may go up. Since public and private sector bonds give higher returns, we expect to generate overall higher returns," says Jalan.
According the PF commissioner, the EPF, on an annualised basis, has given 10.47 per cent returns in the last four years (May 2009-May 2013). This is better than the 9.85 per cent and 9.17 per cent given by the central and state government schemes, respectively, of the
National Pension System (NPS).
The NPS was launched by the government of India in 2004. Initially it was only for government employees (mandatory). In 2009, it was opened for all investors.
While the EPF cannot invest in equities, the NPS can invest up to 50 per cent funds in shocks.
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