Amidst a debate in the Government over investment of employees’ provident funds in the stock market, former RBI Governor, Mr Bimal Jalan, cautioned that any such move will have to be backed by a government assurance for making up for losses, if any.
“If it (PF) is invested in equity, there should be backing with government assurance that in case of any shortfall, the funds will be provided by the managers,” the well-known economist told PTI.
He said these funds can be invested in equity, provided “we have sufficient resources to be able to weather fluctuation of at least 10 per cent in the stock market.”
Jalan’s views are consistent with the stand taken by Employees’ Provident Fund Organisation (EPFO) that it was not in favour of investing a part of its Rs 3.5 lakh crore corpus in stocks as proposed by the Finance Ministry.
“... if the investment in the capital market is so good, then there should be no problem for the Government to provide a guarantee regarding the safety of the workers’ capital funds and a reasonable rate of return on the capital,” the Labour Ministry had opined.
However, the Finance Ministry had made it clear that the government cannot stand guarantee to the EPFO investment in the share market.
“There is no question of government providing the sovereign guarantee to any provident fund...government gives no guarantee of safety of returns to any provident fund,” it had said.
Recently, the SEBI Chairman, Mr U.K. Sinha, also batted for investment of the EPFO funds into the equity market.
“India is perhaps the only significant country where there is a prohibition that worker’s money cannot be invested in the market. I have not seen any other market where worker’s money is prohibited by regulation,” he said.