EPFO Hits to Bonds Market

At present our private security market is at the very edge of crises and the world signified the tenth celebration of the breakdown of Lehman Brothers which set off the worldwide money related crisis in September 2008. 

Amidst creating stresses over security in the Indian security showcase EPFO has held any further hypotheses into the commitments of exclusive organizations. 

On ground reality this choice was late by CBT, yet will value this end. Things are half finished with great begin to spare EPFO assets on this descending winding economy.

Background snapshot

Background 

- 10 years back EPFO shed its preservationist tag and acquainted largecap value ventures with the degree of 10% of its FY09 later raised to 15 percent
- Obligation were permitted distinctly in AAA+ classification
- Later some adaptability was allowed by the EPFO board in its obligation class to take into account organization of surplus EPFO Funds.

Present Problem -

• The descend wind of our economy had put Indian at its worst 
• Stock Market has taken a huge beating, FPI fled & Industrial Layoffs increasing - Auto Sector needs immediate aid to sustain in market. After Agriculture, Auto sector gives huge employment opportunity to the nation but this situation had add jobless population. 
• DHFL downgraded, IL&FS group defaults, ADAG is not showing any morning star - where EPFO has an exposure more than 3K cr. The retirement fund is not allowed to deploy in any corporate bonds rated below AA+, The recent credit risk events at large corporate has made EPFO sit up and take notice to stall any asset-liability mismatch in its humongous debt corpus.

In case of huge scale credit downsize, given the immense size of its obligation ventures, EPFO may find hard to sell the majority of its minimized obligation papers. The leading group of EPFO shows up properly worried on this check and may take pre-emptive restorative measures.

So, the decision made by the CBT in Hyderabad Meet is welcome for the safeguard of pensioners.

Source -

Bloomberg Quint - EPFO To Withhold Investments In Bonds Of Private Companies
Deccan Herald - EPFO withholds investments into corporate bond market
Money Control - Credit crisis fallout: EPFO may not allow private AMCs, corporate houses to manage retirement corpus