EPFO looks to invest in infrastructure debt fund
Keen to
get better returns on its investments, the Employees’ Provident Fund
Organisation is looking at putting a part of its Rs 5 lakh crore corpus in the
finance ministry’s pet funding option for core sector projects — infrastructure
debt funds (IDF).
The move,
if it goes through, will also help the cash-strapped core sector that requires
an estimated $1 trillion over the next five years.
“If we can
invest in bonds of infrastructure companies such as Power Finance Corporation,
we should also be able to invest in bonds of the IDF. There should not be any
distinction,” a senior EPFO official said.
The EPFO,
through the labour ministry, has already begun talks with the finance ministry
on the issue, the official said. A meeting between secretaries of the two
ministries is expected to take place later this month to discuss easing of the
EPFO’s stringent investment pattern for this purpose.
With
rising asset liability mismatch banking sector funds for long gestation core
sector projects have largely dried up and the finance ministry has been pushing
for more investment in the infrastructure sector by insurance as well as
pension funds.
While the
department of economic affairs had earlier written to the EPFO to invest in
infra debt funds, the department of financial services has also asked the
insurance regulator IRDA to relax norms for insurance firms to allow for
greater investment in the infrastructure sector.
“We need
more investment opportunities, if we have to better returns for our
subscribers,” the official pointed out. But concerns over risks entailed in
such projects need to be addressed before the traditionally risk averse
retirement fund manager will agree to invest.
With
strict investment guidelines that allow a majority of its corpus to be put in
government backed securities, the EPFO had in 2011-12 been able to offer just
an 8.25 per cent return to its subscribers.
While the
idea of setting up an IDF was originally discussed way back in 2009, former
finance minister Pranab Mukherjee had in Budget 2011-12 announced that such
funds would be set up. Since then a handful of IDFs are in the making, securing
long term funding is a major obstacle for all of them.
The first
IDF was set up earlier this year jointly by private sector lender ICICI Bank,
Bank of Baroda, Citibank and Life Insurance Corporation of India (LIC) with a
corpus of $ 2 billion. Last week SREI Infrastructure also got regulatory
approval for launching such a fund, which is likely to come up by early next
year while state owned IIFCL is also planning to launch an IDF later this year.
Core
investment
* The
EPFO, through the labour ministry, has already begun talks with the finance
ministry to put a part of its Rs 5 lakh crore corpus on infrastructure debt
funds
* A
meeting between secretaries of the two ministries is expected to take place
later this month to discuss easing of the EPFO’s stringent investment pattern
for this purpose
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