The decision by the Employees’ Provident Fund Organisation (EPFO) to credit exchange traded fund (ETF) units into the provident fund accounts of its members, termed unitizing, represents a long overdue progress towards modernization of investment policies and fiduciary responsibility towards its members. It is a step towards EPFO’s aim to become a professional and globally compatible social security organization.
The proposal is that the members will be able to track their EPF investments in equities, and realise the gains from them at the time of withdrawal of their EPF funds. EPFO began to make equity investments through ETFs— which unlike mutual funds are marketable securities that track an index such as the BSE Sensex—only in 2015. Its total investment in ETFs in 2017-18 is projected by market analysts to be in the range of Rs250-300 billion. The total financial assets under the EPFO’s management are estimated to be about Rs10 trillion (equivalent to about 8.5% of India’s GDP).
