With its top decision-making body meeting for the first time this fiscal, the Employees Provident Fund Organisation (EPFO) has sought permission for more flexibility in investing to help it improve its rate of return.
Accordingly, the EPFO has sought permission from the Central Board of Trustees to invest more funds in the State Development Loans as well as bonds of state-owned power producer NTPC.
The proposals are listed for discussion when the CBT led by labour minister Narendra Singh Tomar meets on August 26.
According to the agenda for the meeting, the EPFO has proposed to enhance the limit for investments in government securities to 70 per cent from the current limit of 55 per cent.
For the last six months, it is being witnessed that sovereign bonds particularly the SDLs which have no concern of security are offering better rate of return than many of the corporates. This is mainly because there is negligible fresh issuance in corporate market in recent past, EPFO had said in a letter to the labour ministry in May this year, adding that the SDLs provide a much higher return than that offered by PSU bonds.
The EPFO with a corpus of over Rs 6 lakh crore is typically one of the only investors that holds government paper till maturity. Higher investments by the EPFO in government paper will also have a significant impact on the bond market, experts said.
Meanwhile, the retirement fund manager has also asked approval from the CBT to invest Rs 10,000 crore in secured non-convertible bonds of NTPC starting from the current fiscal under a long-term agreement.