The government has allowed retirement fund body EPFO to invest 5% of its corpus in exchange traded funds which will result into an inflow of around Rs5,000 crore into the stock markets during this fiscal.

Labour Ministry has notified a new investment pattern for the Employees’ Provident Fund Organisation which allows the body to invest 5% of its funds into ETFs. “We will invest 5% of the investible funds of EPFO into the ETF. The new investment pattern had been notified two-three days ago,” Labour Secretary Shankar Aggarwal told newspersons.

As per estimates, the EPFO’s incremental deposits for 2014-15 would be around Rs80,000 crore. During the current fiscal, the incremental deposits could be around Rs1 lakh-crore as the body had increased the monthly wage ceiling for coverage under its social security schemes to Rs15,000 from Rs6,500 in September last year. Elaborating further, Aggarwal said, “We will begin by 1% and go up to 5% by the end of this financial year. They (EPFO) have to reach the figure of 5% by the end of this financial year.”

He further said: “The Finance Ministry had advised us to invest 5%-15% of corpus in equity market. We are entering into the equity market for the first time therefore, we are a little cautious. “It is hard earned money of the employees. We cannot take that kind of risk (investing 15% of corpus in equity). By end of this fiscal year we will touch a figure of 5%.”

Aggarwal added: “We have to begin investments in ETF only. We will decide how much proportion we will invest in PSU ETFs. If it is in the interest of workers then we will do that.”