MUMBAI: The Central Board of Trustees (CBT), in a meeting held in Hyderabad on Wednesday, have decided to withhold investments in bonds of private sector companies by the Employees Provident Fund Organisation (EPFO). The decision to avoid any risks that arise from investment in private firms perhaps stems from the losses the organisation had to suffer in the wake of IL&FS default. The CBT has also decided to tread with caution in PSU bonds category, insisting on at least one of the two required ratings be from CRISIL, CARE, ICRA or India Ratings.
The trustees also discussed the IL&FS issue and have nominated three officers of Investment Division of EPFO to attend the Debenture — Holder’s meeting in future and vote on behalf of the Central Board. Defaults by some of the private firms like IL&FS, DHFL and the series of ratings downgrades following such defaults have accentuated the risks involved in debt investments, which was generally considered less riskier than equity. The Board also approved of early redemption option in DHFL bonds.
The EPFO mandate to fund managers was to invest a minimum 45 per cent and up to 65 per cent in government securities and a minimum of 35 per cent and up to 45 per cent in listed and unlisted debt instruments issues by corporates, banks and public financial institutions. It also allows up to 5 per cent investment in short-term debt and 5-15 per cent in equities.
The board also conceded to a long pending demand of pensioners, restoring commutation of pension that was stopped in 2009 benefitting over 6.3 lakh non-government pensioners. “In a major decision, the CBT EPF in a meeting held at Hyderabad on August 21, 2019, approved the proposal to recommend for amendment in Employees’ Pension Scheme (EPS) 1995 for restoration of commuted value of pension to the Pensioners after 15 years of drawing commutation which will benefit approximately 6.3 lakh pensioners,” it said. Commutation allows the pensioner to take a lumpsum amount from the EPFO fund and a lower a pension for 15 years. After that, the commutation value will be added back and full pension paid.