Senior official says govt always has a buffer or surplus from returns it makes on EPFO’s investments, which ensures that employees’ savings remain protected.
New Delhi: The Union labour and employment ministry has assured that the savings of subscribers in the Employees’ Provident Fund (EPF) scheme will be protected, irrespective of the returns made on investments by the organisation that runs the scheme (EPFO) in corporate bonds of private companies.
This is after Anil Ambani-owned Reliance Capital defaulted on its interest payments to the EPFO.
According to a senior official, who spoke to ThePrint on the condition of anonymity, the government always has a buffer or surplus from the returns it makes on the EPFO’s investments, which ensures that employees’ savings remain protected.
“At least 80 per cent of the corpus of the EPFO is invested in safe assets like public sector bonds and government securities, which do not default. Twenty per cent of the investments has to be in corporate bonds, including those issued by public sector undertakings, on which there is very high interest that we earn, so there is enough buffer to cover the liabilities,” the official said.
The case in point here is that of Reliance Capital. Last week, Minister of State for Finance Dr Bhagwat Karad told the Rajya Sabha that the firm, in whose non-convertible debentures (NCDs) EPFO had invested Rs 2,500 crore, has defaulted on interest payments of Rs 536.64 crore as on 30 November 2021.
Karad, however, said there has been no default on the principal payments of these NCDs.
“Ministry of Labour and Employment has further informed that as the maturity date of these investments has not become due till date, there is no default on principal,” Karad had said.
The Union labour ministry has fixed 8.5 per cent interest for the year 2020-21 to subscribers of the EPF scheme, resulting in a pay-out of around Rs 70,000 crore as interest, leaving a surplus of Rs 1,000 crore. This was mentioned at the meeting of the central board of trustees of the EPFO in November 2021, according to government sources.