The Employees Provident Fund Organisation's key advisory body, Finance and Investment Committee, would meet next month to take a view on parking 3 to 5 per cent of its large corpus of Rs 2.57 lakh crore in the capital market.
Asked whether the Committee would take a view on investing a part of the provident fund corpus in the stock market, a senior labour ministry official said, "The Finance and Investment Committee is meeting on October 8. The agenda will be finalised shortly."
EPFO sources said the issue has been pending for long and it is most likely to be discussed at the committee meeting scheduled next month.
The proposal, if approved, would result in Rs 13,000 crore flowing into the stock markets.
After evaluating the proposal, the FIC would make necessary recommendations to the EPFO's apex body, the Central Board of Trustees (CBT), for the final decision. It is a general practice that FIC recommendations are accepted by CBT.
At a recent meeting of the FIC on August 18, an EPFO official favoured parking 3-5 per cent of the funds in stock market through a detailed presentation. "Index-based strategy for investment in equities would be most suitable for EPFO's need", he had said.
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During the meeting of FIC, it was felt that alternative avenues are a must to enhance or maintain overall returns to subscribers as fixed-income products would, as in the developed economies, lessen in future.
Investment in equities provide a good hedge against inflation, unlike fixed income securities, the EPFO official had said in the presentation. That means equities investment is better than fixed income securities.
The EPFO has not invested in stock markets so far.
This July, the CBT had dumped the proposal of parking up to 15 per cent of its funds in equities under a new investment pattern suggested by the Finance Ministry in August last year.
K P Krishnan, Joint Secretary in the Finance Ministry, then told the Trustees that EPFO could begin by parking 3-5 per cent of corpus in stock index, if the CBT members had reservations about investing in equities.
Krishnan had also said long-term investments in the stock index would generate healthy returns to the EPFO with negligible risk.
Earlier in March this year, the FIC had also turned down the Finance Ministry's proposal of parking up to 15 per cent EPFO funds in companies listed on the Bombay Stock Exchange and the National Stock Exchange, and also the equity-linked schemes of Sebi-regulated Mutual Funds.