A chunk of the ₹91,000 crore corpus that the Employees’ State Insurance Corporation (ESIC) keeps in ultra-safe, but low-yielding fixed deposits (FDs) could find its way into stock markets and corporate bonds, with the Union government considering an expansion in its investment scope.
The move could open up new investment avenues such as mutual funds, corporate bonds, commercial papers of leading private banks, and even equities, two government officials aware of the plan said on condition of anonymity.
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ESIC deducts a portion of salary from employees earning up to ₹21,000 a month, who are primarily industrial workers. The money is invested in fixed deposits of public sector banks and bonds of public sector units (PSUs), and the returns are used to provide medical assistance from primary to tertiary care to these staff and their families.
Unlike the Employees Provident Fund Organisation (EPFO)—the other social security body under the labour ministry with a larger corpus investing some of its annual accruals in stock markets through exchange-traded funds (ETFs)—ESIC does not have the mandate to do so.
According to data available up to 31 March 2019, out of ESIC’s ₹91,444.07 crore investment, ₹15,730.17 crore is in a special deposit account and ₹75,713.90 crore in fixed deposits with public sector banks.
“ ₹75,000 crore in PSU bank FDs is an under-utilization of the corpus. The easier reference ESIC can be asked to take up is that of EPFO, where other than government securities and PSU bonds, it has the provision of investing up to 15% of annual accruals in the stock market via ETFs, besides a wider bouquet of debt instruments,” said a government official, one of the two people cited earlier.
ESIC has the option of investing in PSU bonds and some scheduled commercial bank FDs, but it’s not enough, and in practice, it is more PSU FD-oriented, the official added.
Though it’s not yet final whether the entire corpus will be invested in more investment instruments or just some of its annual accruals ranging between ₹10,000 crore and ₹15,000 crore, authorities are considering to make it part of the social security code and may allow ESIC to follow the investment pattern of EPFO.
“EPFO follows an investment pattern advised by the finance ministry. We may make provisions in the social security code Act, in which ESIC Act has now been merged, to follow a similar pattern or something closer to that,” the second official said.
EPFO invests in equities via Sensex and Nifty ETFs, besides government-backed Central Public Sector Enterprises (CPSE) ETF and Bharat 22 ETF. It also invests in several debt instruments and was recently allowed to put money in Sebi-approved debt ETFs, too.
The move, if implemented, will perhaps better utilize the ESIC corpus and earn a higher return on investments, helping it offer better service to subscribers and gig and platform workers who are set to join ESIC after the social security code is implemented.
A labour ministry spokesperson declined to comment.
Subscribers of ESIC are called insured persons or IPs. Currently, there are 41 million IPs, and the overall ESIC beneficiaries are over 132.4 million, including the families of these workers. An IP pays 0.75% of his or her basic salary, and 3.25% is given by the employer to the ESIC kitty.