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EPFO to seek trustees’ nod to invest Rs 10,000 cr in NTPC bonds

Flushed with funds, retirement fund body EPFO has proposed to invest up to Rs 10,000 crore in secured non-convertible bonds of state-run power producer NTPC starting from the current fiscal under a long term agreement, besides seeking  approval of its trustees to invest more funds in government securities, particularly state development loans (SDLs) as they offer better returns than corporate bonds.

EPFO has said: ‘..with the growing size of the fund under management of EPFO, need to have coordinated negotiation with some of the major issuers with PSUs have been felt.’

According to the proposal, the NTPC debt instrument will be non-convertible, non-cumulative taxable redeemable bonds.

The Employees' Provident Fund Organisation will invest Rs 2,000 crore to Rs 5,000 crore per annum for of three years starting from 2014-15 subject to a maximum of Rs 10,000 crore.

EPFO has planned to invest a minimum of Rs 500 crore in the NTPC bonds every quarter of a year.
Besides, it has pitched for setting up of public sector undertaking (PSU) cell within its Investment Monitoring Cell (IMC) to negotiate with primary issuers (of bonds) on behalf of all fund managers.

‘...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 corporate instance. This is mainly because there is negligible fresh issuance in corporate market in recent past,’ EPFO had explained to Labour Ministry in a letter on investment in SDLs.

In June, Labour Ministry asked EPFO to submit a proposal seeking changes in the investment pattern after obtaining CBT’s approval.

Once approved by the EPFO apex decision making body, the CBT, headed by Labour Minister, the said amendment would be notified by Labour Ministry after due diligence.

After notification of the amendment, EPFO would be able to invest a maximum of 70 per cent and 55 per cent incremental accretions in government securities and debt securities/TDRs respectively.

EPFO manages a corpus of about Rs 6 lakh crore with an active subscriber base of about 5 crore members.

It had received Rs 71,195 crore as incremental deposits from its subscribers last fiscal, which was 16 per cent higher than Rs 61,143 crore collected by it in 2012-13.

The new government's decision to increase the wage ceiling for EPFO schemes to Rs 15,000 per month from existing Rs 6,500 crore, is expected to bring about 50 lakh more workers under its social security schemes. Thus EPFO's incremental deposits would further increase in coming days.
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