If the BJP-led NDA government decides to hike provident fund (PF) investments in stock markets from the current 5 percent and equities remain buoyant, millions of employees and workers can expect a higher interest rate in the current fiscal.
Currently, the Employees' Provident Fund Organisation (EPFO), which manages the provident fund money of about 40 million Indian workers and employees, pays about 8.50 per annum annually.
The interest rate for 2015-16 was 8.8 percent, the highest since 2010-11 when the retirement fund manager paid 9.50 percent.
"An emergency meeting of Central Board of Trustees (CBT) of EPFO will be convened soon and a final decision on how much (increase in quantum of investments in ETF) percentage will be taken after taking opinion. Earlier, we had gone for 5 per cent. Now, how much we have to increase I will take a decision after the emergency meeting. Anyhow the increase will be there and how much increase...within next 15 days we will decide," Union Labour Minister Bandaru Dattatreya told PTI.
The retirement fund manager, which has a corpus of about Rs. 8.5 lakh crore, entered the stock markets for the first time last August via the exchange traded fund (ETF) route.
"Taking advantage of the greater flexibility and increased avenues afforded by the revised pattern of investment, EPFO took its first steps into the equity market in August 2015. It was decided to test the waters by opting for the relatively safe route of investments through Exchange Traded Funds. (Initially, 5% of the incremental corpus)," the EPFO had then said.
Initially, SBI Mutual Fund was mandated to manage its ETF investments and later got a three-year extension in March this year. UTI Mutual Fund was roped in last month for a one-year term to manage 10 percent of the EPFO's ETF corpus.
The invested amount of Rs. 7,468 crore by the EPFO was worth Rs. 8,372 crore as of July 31, translating into a return of 12.1 percent, according to the minister.