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Trade unions have decided to oppose any move to invest part of over Rs 5 lakh crore corpus of retirement fund body Employees' Provident Fund Organisation (EPFO) in equity market.
The unions' reaction came following reports in a section of media stating that the Finance Ministry has drafted a new investment pattern for non-government provident funds, superannuation funds and gratuity funds which will allow parking up to 30% corpus in equity market including exchange traded funds and index funds.
"Earlier we have opposed any investment by EPFO in equity market. We will oppose it again as it is poor workers money," All India General Secretary of Bharatiya Mazdoor Sangh Virjesh Upadhyay told PTI.
Upadhyay who is also an EPFO trustee said, "We will take up the issue in the next meeting of the EPFO's apex decision making body, the Central Board of Trustees' headed by Labour Minister."
However, Upadhyay said he was in favour of setting up a workers' bank using EPFO funds to meet the credit requirements of the working class and earn better returns on investments.
Reacting to the media report, another trustee, All India Trade Union Congress Secretary D L Sachdev said, "We will oppose it. We will point it out in the next meeting of the CBT. They have tried to do it earlier also but they could not do it."
According to Sachdev, EPFO is custodian of poor workers' money and therefore the fund cannot be invested in the equity markets which are highly volatile.
Finance ministry has been pitching for EPFO funds to be invested in the equity markets to maximise their yields. However, following strong opposition from unions in view of the volatile nature of stocks, the EPFO did not opt for equity investment.
The Finance Ministry had allowed the EPFO to invest up to 5% of its funds in equity in 2005 and enhanced the limit to 15% in 2008.
A recent notification by the labour ministry allows the EPFO to invest up to 5% of its funds in money market instruments, including units of mutual funds and equity-linked schemes regulated by the Sebi.
Sachdev said EPFO's majority of over 5 crore subscribers across the country are low paid workers.
On the idea of setting up workers bank, he opined there was a lot of ground work needed before undertaking such a venture.
The policy makers would have to factor in the losses due to bad loans or NPAs on any such workers' bank and their impact on returns as well as investment of funds, he added.
