The retirement fund manager EPFO will soon be allowed to purchase long-term government bonds with maturity of 10 years or more from the secondary market.
Under the present investment guidelines, the Employees Provident Fund Organisation (EPFO), which manages a corpus of Rs. 2.57 lakh crore, can buy only short-term government bonds from the secondary market, except bonds floated by the Reserve Bank.
The EPFO, however, can continue to invest in short-term and long-term bonds in the primary market.
This decision is likely to help the money market as it will push up demand for long-term government bonds.
The decision was taken the Finance and Investment Committee (FIC), the advisory body of the organisation, and will be placed before its apex decision-making body, the Central Board of Trustees (CBT) for approval at its next meeting scheduled for December 5.
It is a general practice that the CBT upholds the recommendations of the FIC. Arguing that the secondary market restrictions are regressive, the FIC had on August 18 suggested appropriate modifications to the investment pattern.