EMPLOYEES' PROVIDENT FUND ORGANISATION
NEW DELHI
72nd . Meetingof t~e
FINANCE AND INVESTMENT 'COMMI'I'1'U[CENT'RALBOARD OF TRUSTEES, EMPLOYISSS' PROYIDINTF:t"ND]
on22ND MAY, 2003 at 1-1.00 A.M.
VENUE :
Conference Hall3rd floor,EPFO Headquarters,Bhavlshya Nidhi BhGwan,14, ~i~ijf Coma Place,NewpeUti - 11006b
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[. rn:.: :.:;\,ees I Provident Fund Organisation; ','::~!£try of Labour, Govt. of India)
'X,;j ;:j-;r'II<11l/Head Office, f 14, "~!W.~ <fiTI1l ~ff, ~ ~~110066
"" ::;""'/3n. 14, Bhikaiji Cama Place. New Delhi-110066
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• Jo Invest. IIi (72nd)iF&i Meetingi2003fcr;:fic.p
Dated 1<3·5-~oo3r
To
Sub:-
All tv1embers,Finance & Investment Committee,Employees' Provident Fund
Agenda Papers for the 72nd meeting of the Finance &Investment Committee, Scheduled to be held on 22 May,2003at 11.00 A. M. \n the Conference Room, Bhav\shya N\dh\Bhawan, 14- Bhikaji Cama Place, New Delhi-110066.
I am directed to refer to this office letter of even no dated09-04-2003 on the captioned subject and forward herewith agendapapers for the said meeting.
Kindly acknowledge receipt.
You are requested kindly to make it convenient to attend themeeting.
YOurse,y,(NAVENDU RAI)
ASSIST ANT COMMISSIONER (INVEST ..)
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Copy forwarded to:-
P.S to S€c.relary (Labour), Government of India, Ministry of Labour, NewDelhi.
L. P.s. Addl. Secretary(Labour) Govt. Of India, Ministry Of Labour, New Delhi.=:: r.s. to C.P.F.C."- RPFCF & A)5. RPFC(Conference), Centrai Office.6 Shri C.M.Pillai, D.G.M SBI,Central Office, Madame Cama Road,
400021.7. Add!. CPFC(Pension).
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I (NAVEt~DU RAI)ASSISTANT COMMISSIONER(INVEST.}(
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1J the{ 1\'\1 l= t L (~t,,-·jJ.'[ r I~tA)]CONTENTS
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rI Item No. Description.
Page No.
1. Confirmation of the Minutes of the 71st Meeting of the
Finance and Investment Committee held at New Delhi.~ -8.
2. Statement showing the action taken on the recommendations
of the committee. I c,-/G
i3. Proposal of IFCI for rollover of dues payable to CBT, EPF 11 \ -I~:
Declaration of rate of Interest to be credited to EPf i4. I
members' account for the year 2003-2004. r \S'-2.2.
5. Special audit report on investment portfolio of Employees'
Provident fund Organisation managed by the State Bank of ~3India for the period 1.10.2000 to 31.03.2001 and for the
year 2001-02.
6. Any other item with the permission of the Chair
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The draft minutes of the 71ftmeeting of Finance& Investment Committee held
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Item No.1: Confirmation of the minutes of 71n meeting of the Finc:nce&
Investment Committee held at New l>elhi.
~at New Delhi on 23.04.2003 were circulated to all members of the Committee vide
letter No. Invest.I/(71stMeeting)OZ/1905-15 dated 7-5-2003. (Copy of the minutes of
71st meeting is enclosed)
No comments have been received so far.
The committee may,therefore, confirm the minutesof the 71st meeting.
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DRAFT MINUTES OF THE .71Sf MEETING OF THE FINANCE AND INVESTMENTCOMMITTEE« CENTRAL BOARD OF TRUSTEES. EMPlOYEES' PROVIDENT FUND
HELD ON 23.04.2003 AT NEW DELHI
The 71st meeting of the Finance and Investment Committee, Central Board of
Trustees, Employees' Provident Fund was held on 23Nf April, 2003 in New Delhi at 10.30
a.m. The meeting was chaired by the Additional Secretary (Labour), Govt. of India.
The follOWingwere present:
Shri Ram Tarneja, Member
Shri Hasubhai Dave, Member
Shri J.P. Chowdhary, Member
Shri G. Sanjeeva Reddy, Member
Shri Gaurav Dave, Member
Shri Anirudh Rai, Convenor
Shri Ajai Singh, Central Provident Fund Commissioner. also attended the
meeting., Shri C.E.S. Azariah, Chief General Manager(Treasury), State Bank of India
and Shri C.M.Pillai, Deputy General Manager, State Bank of India attended the meeting
as special invitees.
At the outset, the Chairman welcomed the members and special invitees to the
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meeting. Thereafter, agenda items were taken up for discussion.
Item No.1: -Confirmation of the minutes of the 70th meeting held on 03-
12-2002The Committee confirmed the minutes of its 70th meeting held on
03.12.2002.
Item No.2: Statement showing the action taken on the recommendations of theCommittee
Item No. 2 (1): Liberalization of Investment Guidelines:
The Committee 'noted the contents.
Item No. 2(2): Outstanding Interest and Ma"turity proceeds
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The Committe~ noted the contents and advised that legal notices be
issued to the defaulters who were not responding to the reminders sent to them
for recovery of outstanding interest and maturity proceeds,
Item No. 2(3): Idle FundsThe Committee noted the contents. It was advised to avoid idling of
funds by speedier movement cf funds from field offices to the
investment account. It was clarified that the issue under consideration
pertained to idling of funds in investment cccount. It did not pertain tol
transfer of funds from field offices to the centralized account
maintained at main branch of State Bank Of India, Mumbai It was
further clarified. that after the Re-Engineering of business processes,
any delay in transfer of funds from field offices to the centralized
account will be taken care of by way of electronic movement of funds.
Item No.2(4) : Extract of concurrent audit reports fumis~d by the State Bank
of India
The Committee noted the contents.
Item No.2(5) Investments of CentNl Board of Trustees, Employees' Provident
Fund in IFCI
The Committee noted the contents and desired as under regarding
the proposal of IFCI related with restructuring of investments of
CBT. EPF:-
• IFCI be advised to meet their obligations fully up to 31-03-
2003 in respect of investments of CBT, EPF at the
contracted rate of interest as provided in the respective
securities.
• For consider-inq the proposal of IFCI a separate agenda item
be placed before the committee during its next meeting and
IFCI be advised to make a presentation before -the
Committee.
• The Committee may also negotiate a higitler rate of interest
at 9.5% while considering the restructuring proposal.
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• IFCI be advised to provide a letter of comfort from Ministry
Of Finance for security of investments of CBT,EPF in IFCI.
Item No.2(6) Investments of Central Board of Trustees, Employees' Provident
Fund in bonds issued by PSIDC
The Committee noted the contents .
Item No.2(7) Declaration of rcate of interest for EPF subscribers for the year
2002-03
The Committee noted the contents.
Item No.2(8) : Status Paper on State Gowmment guaranteed securities
The Committe~ desired that study report be given by the State Bank
Of India and a presentation be made regarding requisite amendments
in the existing investment pattern and gUidelines.
Reviewof InvestmentItem No.3:
Item No.4:
The Committee noted the contents and approved the item.
Committee desired that State Bank .of India should furnish YTMalso
in respect of data retating to purchase of securities and the same was
agreed to by the CGM,SBI.
Deciarcationof rate of Interest to be credited 'to EPFmember's
accounts for the year 2003-2004.
The agenda item was discussed. After discussion the following issues
emerged:-
• The committee took a note of letter dated 21st April, 2003 of
Sh. Gaurav Dave,.Member.
• The committee was informed that although there was a default
on the part of PSIDC in the repayment of principal and
interest thereon, they had repaid the dues in part.
• National economy is paSSingthrough a turbulent phase and the
defoults are likely to go up on the part of PSUs, PSFls and
other institutions under the State Govt. guaranteed category.
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• Interest rate on EPF accumulations is dependant on the
interest incomeof CBT,EPFwherea$ RBI gives administered
rate of interest onPFaccumulationsof its employees.
• Committee was informed about downwardinterest rate trends
in various types of securities. It was observed that as per the
current investment scenario, SDS is the onlysafe investment
avenue givinghigher interest rate and it comprises 80%of the
provident fund corpus. Special Deposit Scheme will remain
operational upto .Tune2003 unless Govt. of India extends it.
Further, the revised notification about investment pattern
dated 6th March, 2003 issued by the Ministry of Finance is
silent regarding reinvestment of SDS interest. If Govt. of
India takes a decision to borrow cheaper money from the
market and offload SDS, reinvestment of the same will
substantially reduce the earning of CST, EPF.It is therefore-..necessary to keep reserves for such type of contingencies.
• Committeewas informed that interest couldn't be declared out
of capital. As per Para 60 (4) of the EPF Scheme, 1952 in
determining the rate of interest, the Central Govt. shall
satisfy itself that there is no overdrawal on the Interest
Suspense Account as a result of the debit thereto of the
interest credited to the accounts of members.
After deliberations it was decided as under:
• Govt. of India hes introduced ·Varishtha BeemaYojonc"in the
Budget for the year 2003-2004. whichprovides for 9% return
for retiring people. Govt. of India wUlsubsidise LIC for this
scheme out of its budget. Provident Fund and Pension Fund
Schemes governed under EPF& MPAct also serve the retiri ng
people. Hence Govt. of India may be. requested to subsidise
these schemes too on Similarfootings. At least the Govt. may
restore the rate of interest on SDS from 8%to 9%.
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1),,.d~ f\(j~ H -:=tIS! Fit ~ ~ 2.~.y ·.loo3/ ~' • Rural Elect)ifiCation Corporation (RE<;) had reportedly given
interest @ 11%to its PF members for the year 2002-03. The
same may be examined to ascertai~ their composition of
investments and reasons of higher returns.
• Decision on recommendation of rate of interest on EPF
accumulations for the year 2003-2004 for crediting interest
in the accounts of provident fund members be Ideferred and
till then no payment of interest be released to the provident
fund members for the year 2003-2004.
Item No.5: Status paper on 16% HMT ~nds
The committee was informed that the next date of hearing of the
case is 27.05.2003. Committee was informed that HMT Ltd. has
desired to settle the dues of CBT,EPF in the form of land. It
emerged that HMT Ltd be advised to get the due diligence done at
their cost so as to ensure marketable title, non-encumbrance and
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valuation of the land. Thereafter, the proposal of HMT and modus
operandi regarding sale of land f-or recovery of dues cari be
considered by the committee.
Item No 6: Pattern of investment to be followed for investments made by the
CST. EPF and the PF Trusts granted exemption under relevant
provisions of the Employees' Provident Funds and Miscellaneous
Provisions Act. 1952.
The item was approved with follOWingobservations:-
• In the revised investment pattern dated 06..•03-2003 notified by
the Ministry Of Finance, the percentage amount to be invested in
bonds/debentures of PSUs/PSFIs has been reduced from the
existing 40% to 30% and in the residual category, the percentage
to be invested has been increased from 20% to 30% although the
CBT;EPF had recommended to reduce the ratio of investment in
PSU/PSFI category from 40% to 20% with a corresponding increase
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in residual category. The Central Government (Ministry of Labour)
may be requested to re-notify the investment pattern under para
52 of the EPF Scheme 1952.
Item No.7:
• Regarding study for identifying new avetues for investment,
investment guidelines etc., an agency of International repute such
as Price Water House Coopers etc., may be engaged on competitive
basis, In the terms of reference, the consultqnts be advised to give C
the~r recommendations regarding own setup of EPFO for investing
its funds. Suggestions given by the BombayChamber Of Commerce
& Industry for issuance of special bonds by the Government and of
multilateral bonds by ADBlWorld Bank etc. for PF investments may'
also be considered by the consultants.
Revised accounting poIic:yfor Investments.
Committee approved the item as proposed.
Item No. 7A : Special audit report on investment portfolio of ~mployees' Provident
'Fund Organisation managed by the State Bank of India for the
period 1.10.2000 to 31.03.2001
The item was deferred
Item No.7B : Audit Report of Portfolio Auditors for the year 2001-02
The item was deferred
The meeting ended with a vote of thanks to the Chair.
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I tem no. 2: Statement showing the action taken on the ~commendations of the
Committee.
Investments of CBT,EPF in IFCI.
Action Taken.SI. ReconvnendationsNo1. Outstanding interest and maturity
proceeds.The State Bank of India have been advised toensure prompt c~lIection of ~eceivables, ifrequired by taking appropriate legal actionvide letter no. Inv:I1 Action Taken/F&I/02dated 13th May 2003.
2. Extract of Concurrent Audit Reportsfurnished by State Bank of India
The SBI has been requested to furnish therelevant extracts of concurrent audi~ reportfor the period from October 2002 onwardsvide letter no. Inv.II Action Taken/F&I/02dated 13th May 2003.
3 A separate item in the matter is enclosed.
4. In view of the precarious financial State Bank of India has been advised videposition of many State Government letter no. Inv.I/Action Taken/F&I/02 datedGuaranteed issuers State Bank Of 13th May 2003 to give requisite study reportIndia should furnish a paper on the and the same is awaited.SUbject. The committee also resolvednot to make any fresh investments inthis particular category for the timebeing and proposal to change existinginvestment guidelines be put upbefore CBT,EPF.
5. YTMof investments SBI has been advised to furnish the YTM alsoin respect of securities purchased on behalfof CBT, EPF vide letter no. Inv.II ActionTaken/F&I/02 dated 13th May 2003.
Status Paper on 16% HMT Bonds, Mis HMT Ltd. has been advised to takeFace Value of Rs. 25 crores Non- necessary follow up action and get back toPayment of outstanding interest and Finance and Investment Committee vide letterprincipal. no. Inv.I.3(3)95/HMT IVol.VI dated 13-5- i
2003 .
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.Mis HMT Ltd. has desired to settlethe dues of CBT,EPF in the form ofland. The Committee desired that
IHMT Ltd be advised to get the duediligence done at their cost so as toI ensure marketable title, non-
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encumbrance and valuation of theland. Thereafter, the proposal ofHMT and modus operandi regardingsale of land for recovery of dues canbe considered by the committee.
7. Declaration of rate of Interest to be A separate agenda. item is placed forcredited to EPF member's accounts consideration.for the year 2003-2004
8. Actuarial Valuation of staff pension Preliminary information has been called fromcum gratuity fund HR Division and from Pension Division at
present interacting with Actuary.
9. Notification of revised Pattern of Government of India has been request videInvestments dated 6.3.2003 issued letter no. Inv.II Action Taken/Fin.&Inv.lby Ministry of Finance under para 52 02/283 dated 13.5.2003' to issue the requisiteof EPF Scheme 1952. notificatIon.
10. Study for identifying new avenues for Term of reference for prospective consultantinvestments and investment are yet to be finalized. Proposed terms ofguidelines. reference will be placed on the table before
the committee on 22.5.2003.
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ITEM NO.3': Proposal of IFCI for sell owr of dues pqyClble to CST. EPF
1. Central Board of Trustees, Employees' Provident Fund made investments in
various Bonds/Debentures of IfCI aggregating Rs.I048.80: crores in respect of
principal alone as on 31.03.2000. from November, 2001 onwards IFCI committed.default in the payment of maturiiy proceeds as well as interest ..
2. Matter, was taken up with the IfCIsewral times for recovery of outstanding
dues. Legal notice was also issued but account was not regularized.
3. In February,2002 IFCI gave its first proposal for rolling over of
interest/redemption proceeds fallen/falling due up to 31.03.2003 in regular income/
On Taf} Bonds for 5/7/10 years maturity at annual interest of 9.5%/10.00%/10.75%
respectively. further, specially structured deep discount bonds of 10 years maturity,
wherein an investment of Rs.100 crores fetching rupees 280 croress on maturity were
offered. IFCI did not explain the manner in which they will honour their obligations
keeping in view their deteriorating financial health. Accordingly. IfCI was directed to
honour their contractual obligations and to make immediate payment of outstanding
interest and maturity proceeds. Thereafter, IFCI made a presentation before the
Finance & Investment Committee in its 6]fh meeting held on lQ.04.2002. finance &
Investment Committee decided that before actually initiating I~I action the matter
may be referred to Ministry of finance for satisfactory resolution of the issue as the
Ministry of Finance was involved in the restructuring package of IFCI. The matter was
taken up with the Government of India on 23.04.2002 for resolving the issue. Response
was not received from Government of India in this regard.
4. The matter regarding. roll over of interest and maturity proceeds by IFCI was
discussed again in the 68th' meeting of Finance & Investment Committee held on
16.08.2002 and the committee rejected the roll over proposal of IFCI. Committee
further, decided that proposal of IfCI for roll over of interest and maturiiy proceeds
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can be considered only if fresh Bonds in lieu of existin$ ones are fully and
unconditionallyguaranteed by the Governmentof India.
5. Government of India infused RsAOO erores in IFCI and IFCI appointed
Mckinsey -de Co. as Corisultant to look into its long term viability. IFCI submitted
followingrevised proposal dated 16.09.2002 subject to directi~n/conditions as may be
stipulated by Government of India whowas consideringpackag~to reconstructing the,
liabilities of IFCI :
(i) EPFO to kindly consider re-schedulement of the principal/interest
fallen/falling due upto 31.03.2003 aggregating to R$.395.62 crores over 5
years in 20 quarterly installments, Rs.20 crores (epprex.) each, commencing
from 20th April, 2003, at current interst rate of 9.5%r
(ii) The interest for overdue period @9.5% to be calculated and paid annually,
the first such installment wouldbe workedout from respective due dates till
19th April, 2003, whichwouldalso be paidto EPFOon 20th April,2003.
6. Mckinsey& Co.Consultant to IFCI advised them to restructure its debts so
that average cost comes downto 9%. Further;IFCI did not mentionanythingabout the
amounts becoming due after 31.03.2003 and did not propose any upfront paymentl
guarantee for repayment. Finance & Investment Committee again rejected the
proposal and IFCI was advised to arrange immediatefull repayment of the outstanding
prindpal and interest alongwith overdue interest.
7. IFCI gave its followingrevised proposal dated 20.01.2003 for roll over of SLR
as well as non-SLRBonds:
(i) Resetting of interest rate at 9% p.a. on all the jcutstondinq non-SLR.
investments with effect from 01.04:2002
OR
Resetting of interest rates on the aforesaid investmentsct a floating rate of
interest at 0.5% above the rate being offered by EPFOto its beneficiaries (at
that time 9.5%) on the outstanding investments with us W.eJ. I" April, 2002.
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The interest rate would be fixed at the beginning of ~ch financial year and
would be aligned with the prevailing EPFO rate as suggest¢d above., .
(ii) To extend the maturity dates of the aforesaid outstarfiing investments for a
period of 5 years from the original date of maturity.
(iii) To reinvest the principal overdue as on 31ft March, 2002 in a 5/7/10 year
Bonds being issued on Tap Basis in book entry form at annual coupon rate of
8.5% /8.75%/9% respectively w.e.f. 01.04.2002: and
(iv) To bear with IFCI for some more time in regard "to payment of dues
pertaining to SLR investments as the SLR liability is likel~ to be taken over by
the Government of India for a select categories of investors including those in
the category of retiremental funds, as a part of the afqresaid restructuring
package already agreed by the major stake holders .
8. IFCI again amended aforesaid proposal and submitted fresh proposal vide
letter dated 6th March, 2003 to seek roll over only in respect of non-SLR Bonds.. Since
IFCI wcsnot Willingto offer any payment upfront, the decision ot the Committee not
to accept their proposal was communicated to IFCI. Thereafter, IFCI made payment
of principal amount of Rs.7,18,80,OOO/- and interest amounting to Rs.6,72,48,158
crores in respect of SLR investments upto 31$1'March.2003 end Rs.72,09,55,800
towards interest up to 31.03.2002 on non-SLR investments.
9. Proposal of IFCI dated 6th March,2oo3 (Copy enclosed) wqs submitted in the
71st meeting of Finance and Investment Committee and it was decid~d as under:
• IFCI be advised to meet their obligations falling up to 31.'03.2003 in respect
of investments of CBT; EPF at the contracted rate of interest as provided in
the respective securities.
• For considering the proposal of IFCI a separate og~nda item be pleced. I
before the committee during its next meeting and IFa be advised to make aI
presentation before the Committee.
,
• The Committee may also negotiate a higher rate of interest at 9.5% while
conSidering the restructuring proposal.
• IFCI be advised to provide a letter of comfort from Ministry of Finance for
security of investments of CST, EPF in IFCI.
10. IFa has been advised to make presentation before the F~nance& Investment
Committee on 22.05.2003. It is. further, informed that J;FCI has deposited
Rs.109,50,67,757! on 31.03.2003 in anticipation of approval of their aforesald request
dated 6.3.2003 for restructuring the dues. IFCI has been communicated that their
unilateral assumption about acceptance of their restructuring request is not
acceptable. However, they can present their case before the F~nance & Investment
Committee on 22.05.2003.
Matter is accordingly placed before Finance & Investn)ent Committee for
consideraTion.
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Item No.4: Declaration of rate of Interest to be credH]ed to EPF members'account for the year 2003-2004. I
Scheme Provisions:
1. As per the provisions contained in Paragraph 60(1) of IIEmployees' ProvidentI
Funds Scheme 1952, EPF organization is required to credit i"1erest on the balance
available in the accounts of the EPFmembers at such rate as may!be determined by the
Central Government in consultation with the Central Board of Ttustees. Para 60(1) of• I
the EPF Scheme needs to be read with Para 60(4) according to 'rhich • in determining
the rate of interest, the Central Government shall satisfy it~elf that there is noI
overdrawal on the Interest Suspense Account as a result of ¢ebit thereto of the
interest credited to the accounts of members".
2. Prior to 01.04.1993, interest was credited on the opening:balance of the year.I
From 01.04.1993, the Scheme provides that interest is to be credited on monthly:,running balance.
3.I
The amount belonging to the Fund is invested according to the pattern of
investment prescribed by the Central Government (Ministry of Labour) from time toI
time. The current investment pattern as notified under para 52 of ~PF Scheme, 1952 is
as under:-
INVESTMENT PATTERNA. All incremental accretions
i)
Percentageamount to beIbvested
ICentral Government Securities as defined inSection 2 of the PublicDebt Act, 1944 Twenty~ivePercent
if) a) Government Securities as defined in Section 2of the Public Debt Act, 1944 (18 of 1944)created and issued by any State Government;and/or
b) Any other negotiable securities the principalwhere of and interest whereon is fully and Fifteen Rercentunconditionally guaranteed by the CentralGovernment or any State GoverfN11entexceptthose covered under iii) (a) below.
fil) a) Bonds/Securities of ·Public FinancialInstitutions" as specified under Section 4 (a) of
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the CompaniesAct: -PublicSector Companies"as defined in SectiDn 2 (36-A) of the Income Forty PercentTaxAct, 1961 includingpublic sector banks and. .the Infrastructure Development FinanceCompanyLimited (IDFC);and/or
b) Certificate of deposits issued by public sectorbanks.
iv) To be invested in any of the above three I T~nty Percentcategories as decided by the Trustees :
vj The Boord of Trustees, subjects to their assessment of the risk-return
prospects, .may invest up to 10% out of (iv) above, "inprivate sector bonds/
securities, which have an tmestment grade rating from at least two credits
rating agencies.
2. Any moneys received on the maturity of earlier i~vestments reduced by
obligatory outgoings, shall be invested in accordance with ,the investment pattern
prescri bed.
::So inten:.:S!" rccc'vcd Or! tl,e Special Deposit Scheme shall be invested in the. .
Special Deposit Scheme, itself. Similarly, interest received,under other categories
shall be re-invested in the samecategory.
4.
New Investment Pattern
Investment pattern has been changedby the Ministry (If Financew.e.f. 1.4.2003.
Revised investment pattern is yet to be notified under para 52 (1) of EPFScheme,
1952.
5. As the decision on the issue was deferred the item is again placed for
consideration. As regards the' Varishtha Bima Yojana' to bedeclored by the LifeI
Insurance Corporation of India wherein the benefits were to !be designed assuminga
return of 9% on investment of the corpus; Governmentof Indialgiving subsidy to bridge
the gap between cctuol return on investments and the promised return of 9%, it is
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informed that the liC is yet to come out with the scheme. The ~vernment of India
has been requested vide letter No. Inv.I/Action TakeniFin.&Inv.lO~/283 dated 13-5-
2003 for restoration of rate of interest from 8% to 9% and notificqtion of Investment
Pattern under 52 of the Employees' Provident Fund Scheme, 1952.
So far as the interest rate admiSsible to Provident fund subs~ribers in the REel!
is concerned it is informed that the REa.. had declared the rate of interest @ 9.5% for
the financial year 2002-03 and is yet to declare the rate of interest for the financialI
year 2003-04. However written confirmation is yet to be received f~m REel.
6. As an interim measure the Committee had declared that no in~erest be released
to members for financial year 2003-04 till a final decision in the ~tter ~sarrived at.
In this regard it would be pertinent to note tha.t EPFO finally set:tles approximately
1,70,000 provident fund claims involVingdisbursement of approx Rs 480 crores every
month to members who decide to finally withdraw the accumulatIons: standing to credit
of their PF account. The decision to defer the payment of interest;for 200~04 till a
final decision is arrived at will considerably add to the administrativ~ cost and time for
the EPFO for deUvery of balance interest amount. The task would invblve:-
i) Photocopying each single settled claim form for t~eating it as' claim
voucher' as the member is not required to make altYfresh claim;
ii) Processing of each claim form for computation of amount payab~e,
preparation of work sheet payment scroll and pas$ing relevant entry
in establishment register (Form 9) withdra\fal registers and
relevant cash books after authorization by each :concerned official
in inward accounts and cash branch.
iii) Preparation of cheques, each individual cheque ~sting Rs. 2/- and
generation of forwarding letters and covering envelop:
iv) Dispatch of cheques by registered post. each dispatch costing Rs.I
20/- in each case.
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Irrespective of the quantum of amount to ~e disbursed the above
process would have to be gone through for erch single case involving
huge cost of man hours. i
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vi) Further additional collection charges will t debited to members
accounts by their bankers wherever su~plementary outstation!cheques are to be issued. !
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7. I
As announced in various newspapers by the Government ~f India as well as theI
Reserve Bank of India there is a conscious move towards a softer interest rate regime,I
in the policy discourse of macro economic management. RBI r~uced CRRto 4.5% withI
effect from .June 14 2003 and Bank rate to 6~ with effect fro~ 29th April 2003. WithI
this cut eRR would have been reduced by 4.0 percentage points in the last three years.,
Whereas the Bank Rate has been reduced from 11.0 per cent to 6.0 per cent, i.e, by
500 basis points in the lest five years. This is the sharpest redUction in the Bank RateI
since independence. The Employees' Provident Fund though b,ing in the nature of a,
retirement scheme, the rate of interest on outstanding deposits in EPF does impactI
upon the overall interest scenario. Moreover an interest rate! of 8% still compares
favourably with returns available on investment instruments of comparable nature· inI
market as informed by our portfolio managers, the State Banik of India is indicated
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W l- I lit -i-a::\,) CL U) CLWU) ~HU) I w • u c~w .~ -ca ~CLa ZU)W ~\,)w\,) ~u"'OWU) w~Z WILZ ~ •.•U) "'0 c-<01- .s '> ::I>-. >-~O >xO coo..~ o..lL-<Z 0..011..0\1) an co an~cQ WCL ,00: E r..•....• I- a , wo..
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Mar- 2000 11.67% 11.00% 8.95% 10.00% 111.00% 12%
Mar - 2001 10.50% 10.77% 8.25% 9.50% 9.!50% 11%'I
Mar - 2002 7.47% 8.67'}'o 7.80% 8.00% 9.pO% 9.5%*i
Mar-2003 6.29% 6.72% 5.25% 6.25% 8.pO%-May- 2003 6.00% 6.00% 5.65% 6.00% 8.pO%
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* recommended by CBT. EPF
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8. Further, the Provident Fund trusts granted exemption under relevent provisionsI
of the EPF & MP Act, 1952 are bound to declare rates of intereSt at rates equal to orI
better than the rates declared by CBT, EPF. Declaration of hiter rates of interest
inevitably means that many exempt establishments have to sUbsidies the rate ofI
interest payable by its provident fund trust. The exempt trusts and representative
empJoyers' bodies have represented that the statutory r~e of interest (on
accumulated balances in the Provident Fund AccOlM'1tsof members) being higher thanII
current yields on prescribed instruments for investment, there iis always a mismatch!
between interest earnings and payment liabilities. The problem i~ ~cially acute forI
PF trusts granted exemption after 1997 when fresh investments i in SDS were stoppedII
by the Government of India and the investment corpus comprise~ debt securities only.I
It is ga1'hered that the establishments in order to declare the ~nterest rates at parI
with statutory rate have to pay extra funds to exempted trust in!addition to statutory,
PF contributions. The CBT, EPF being regulators also in respect ~f exempt trusts, the
problems faced by these trusts may also be considered while rn4king recommendation
about interest rate for 2003-04.
Rate of Interest
9. To recommend the rate of interest for the year 2003-04 to the Government,
the position of estimated amount to the credits of the members ~ on 01.04.2003 and
the estimated yield from the Investment holdings are taken into iconSideration. EPFOI
follows single entry system of accounting and in case of Un-clai",ed Deposit Accounts
of EPF members. interest liabilitieS are computed at the time of 'I settlement of claimsI
only. No provision for interest is made on accrual basis in thf books of accounts.,
Accordingly the surplus of income over liabilities is overstated to ~hat extent.
10. The investment holding (provisional)
provident fund account was as under:
of CBT, EPF as QnI
I
31.3.2003 in the
(All figures in Crort4Sof Rupees)Holding as on '% age31.03.2003 holding
1 Central Govt. Securities 4996.19 7.642(a) State Govt. 2964.32 ,4.53
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(b) Govt. Guaranteed Securities 626..49 01963. Special Deposit Scheme 51845.68 79.274 Public Sector Financial Institutions 4974.64 7161
Total 6~7.33 1(1)0'I
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As is evident from the above, 79~ of total investment holdings in the
Employees' Provident is lying invested in the 5p«ial Deposit Scheme (SDS). Deposits inII
the SDS earn interest at par with interest declared for the smallsctngs schemes and
Public Provident Fund. The interest admissible on deposits in SDS h~ been reduced to!
8'0 per annum with effect from 1st April 2003 (copy enclosed).
I
11. The yield of :the EPF Corpus depends en the market YIeld of the debtI
instruments like Government Securities and bonds of Public i Sector Financial,
Institutions/Public Sector Undertakings. All the Securities as per ~ed pattern areI
now being quoted in the market on a premitm thereby bringing down re yield. Yield on
all securities is thus market driven. With lot of pressure on the i1erest rates, the
yield is falling steadily.
12. Further, as informed earlier there are a few cases where there are defaults in
payment of interest and maturity ~es. Chronic defeelters have ~nM/s HMT Ltd.
And MIs IFCI Ltd. While computing the expected interest income the expected dues
from these institutions have not been taken into account.I
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13. As informed in the 7lst meeting of the Finance and Investmemt Committee the. I
surplus of Rs 218.39 crores, if interest rate is declared @ 8% lis' based on theI
assumption that SDS scheme continues beyond 30th June 2003, ttie due date ofI .
maturity. If the scheme is not extended further then the redemptions of the scheme'I
will start. If Government of India decides to redeem the SDS ~Iance then thatI
amount will have to be reinvested at current yields of 6-6.5%, 'Ithereby further
depressing the overall interest income.
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14. Projected interest Income from Provident Fund invesrments during the yearI
2003-2004 is as under: I,
I (Rs. in crores)
i i
jGrand
PARTICULARS STG -SDLI
PSU TotalCTGINTEREST ON SECURITIES "
MATURING ON OR AFTER 01-04-2004 559.29 66.68 324.13 ~~.09 11393.20Adq: INTEREST ON SECURITIES I !,
. {' I
MATURING UPTO 31-3-2004 (up to,
186.05the date of maturity) 3.74 5.54 8.85 67~92Add: INTEREST ON REINVESTMENT I
,"
""jOF SECURITIES MATURING UPTO ,
j31-3-2004 11.67 2.71 ~.61 18:(6 ,35.75IAdd: REINVESTMENT OF INTEREST""
,
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jPROCEEDS 17.24 2.44 10.49 17.68 '48.04Add: DAMAGES (AS PER BUDGEi IESTIMATES 2003-04) {page 15} 'i 32.00INTEREST RECEIVABLE ON
,
ISECURITIES --> i 1595.04iINTEREST RECEIVABLE ON
i
tDEPOSITS IN SDS (Rs 51837.60 Icrores) @ 8% p.c,'.
4147.01LESS 5% FOR CONTINGENCIES 287.10LESS INTEREST ON Special Reserve:FUl(1 63.91(NET INTEREST RECEIVEABLE 5391.03 I
,
*Relnvestment rates for Finencicl year 2003-04:CTG 6%SbL 6.25%STG 6.50%PSU 6.75%
1~. In view of the foregoing the interest payment liability of ~he CBT,EPF vis-d-vis. I
the expected interest income during 2003-04 along with resulta~t surplus/deficit has,
been worked out and is placed below:-
(Rs. in q.ores)i estimated interest income Interest payment Surplus/~eficit
I
tiability ,
i !
, ~391.03 5495.84 (@ 8.5%) -104.90 I
I 5334.29 (@8.25%) 56.75 I[,
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, 5172.65 (@ 8%) r 218.3f
16. In view of the foregoing the Finance and Investment I Committee may make a
suitable recommendation for declaring the rate of interest for the year 2003-04.I
:I
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Item no. 5: Special audit report on irmstment portf lio of Employees'Provident Fund Organisation managed by the tate Bank of Indiafor the period 1.10.2000 1'0 31.03.2001 and or the year 2001-02.
Audit report on investment portfolio of Employees'Prov'de~t FundOrganisation
managed by the State Bankof India for the period 1.10.2000 to 31J03.2001 and for the• I
year 2001-2002 was. placed along with the comments of State 'I Bank of India andI
Employees' Provident Fund Organisation before the Finance& Iniestment Committee
earlier and this item was deferred for paucity of time. If tim, permits the audit
report willbe put up for deliberations with the permissionof chairp~rson.III
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~IFCILIMITED
ant qq; 'flt ant i«fqag
ResIRestrl2003-.
The Central Provident Fund CommissionerEmployees Provident Fund Organisation,Bhavishya Nidhi Bhawan,14,Bhikaji Kama Palace,New DelhiDear Sir,
March 6, 2003.
Re: Restructuring of Investments by E1jFO
, \~) ~~. • \~f Please refer to our letter No. Res. Restrut/2 3- 491 dated the 20th
,\xV~ \'I' ~~~t/.!January,2003. requesting you, amongst other things, £. r resetting of interest at'9!v'l}~,/r9% p.a on all the outstanding non-SLR investments w.elf 114/2002.
~. ~~\'Ye' .. il•
o~ 2. We have to reiterate that ill order to find alsolution to our current. %. problem of liquidity position and resultant delay in payment of dues to our'Y' investors including the dues of EPFO and otherretiremental funds, we had( engaged McKinsey & Co. a consultancy firm of International repute to make
an assessment of our situation and suggest a long term business plan. In itsrecommendations, McKinsey & Co., inter-alia, has suggested restructuring ofour liabilities including deferment of maturities and reduction in interest ratesand the same has been examined byMajor StakehOlde.~in the category of PSUBanksIFIs and a consensus on the restructuring packa has been arrived at intheir meeting held on the 26th November, 2002 and 2nd pecember, 2002.
,.
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3. The· aforesaid restructuring package, among various measures,includes converting 50% of Non-SLR investments as pn 31/3/2002 into 20-Year Zero Coupon Optionally Convertible Debentures I and remaining 50% isbeing reinvested/reset .at 6% p.a. annual coupon as on l)fJI2002,besides rollingit over for 10 years from the respective original matpTItydates. The SLRLiabilities are also being rolled over for 10 years at the Iprevailing 10 year G-See yield. Many of the above investors have already conveyed their approvalsto the above proposals. While considering the above resaucturing, it has beenenvisaged that Il-Cl may take up directly the proposal fot restructuring liability
~ ~ ~~.fl\.~. -em/IFCITower, 61, ~ G:ffi/Nehru Place, lI\. lILa/p.B.No. 44~, or{ ~/New Delhi·110019Regd. Office 'V"J'f/Phone : 648 7444. 648 7622 $ ~/VolceMail: 64~ 8301-()8 _ I
$iffl(Fax ; 011-623 .02~1~~48 8471 ~~iffl/Tele~: ~Hb82 \ C~ \ tE·mall ; [email protected] Website: www.lfclltd.Jom ,~ (
-towards other category of investors! agencies includes PFs, so as to attain longterm viability. Even though the effect of restructuring of li~ilities by PSUBankslFls will help us to -turn around to a large extent, it would requirerestructuring from other category of investors including retirement funds alsqto turn IFeI into sustainable organisation on long term basis. i Assistance fromEPFO by way of restructuring their dues will go a long way to improve theposition of If'Cl and thereby enabling us to pay the dues to all investors infuture.
4. In this connection you will kindly appreciate that your investmentswith IFeI were made at a time when the rate of interest on investments werequite high. Over a period of time, specially during the lasl two years, theinterest rates have reduced drastically, by about 5%. It is felt that the rates 'overthe years may further slide down. In this scenerio, the current investmentsoutstanding with us if repaid by us on due dates(s) when: reinvested onmaturity in the Govt securities will fetch you much lowerrate of interest,which currently is around 6%. As such your outstanding liabilities with IFe!with interest rate reset at 9.5% p.a, for the financial year 2002-03 and at 9%p.a, w.e.f. 1I4/200~ onwards and maturity shifted by another 1years or more,will effectively result in gains to EPFO as compared to seeking redemptionfrom IFeI on due dates and reinvesting in other risk free securities. Tofacilitate easy understanding of the position we have worked out the presentvalues of:
a) Stream _of notional financial losses over the years, on resetting ofinterest rate and
b) Stream of likely gains over-the years for the investment with !FeI ascompared to yields being offered by risk free securities, details ofwhich are enclosed. A summary of the same is given below :-
A. Position of overduesInvestment by EPFO in Non SLRBonds. outstanding as on 31.03.2003 Rs 1006,5&,PO,000/-
Overdues I As on 31.03.2002 As on 31.03.2003 As on 31.3.2003 @I (Rs) (Rs ) as pet 9.5% ( Rs) and
document rate reinvestment ofI PrincipalI
Principal ! 50J2,00,000 127,85,00,000 -i
Interest I * 131,72,42,500 96J9,03,500**I
Total i 50,12,00,000 259,57,42,500 96,19,03,500
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*after excluding interest overdues ofRs.72,09,S5,800l- as on 31.03.2002 whichwe propose to pay immediately on receipt of your ap~roval for restructurin~.
**including Rs.4,76,14,OOO/- being interest @ 9.S% ion principal of Rs. SO.12crores which had become due by 31.3.2002 and is reqrested to be reinvested.
I
B. Position on reinvestment of PrinciPII amount oliRs. 1006 crores• I
,
I(RsInCrores)Years by Reset Perceived Alternative rate Gain on Net
I
which tenure rate with Loss returnI
of extended Gainis extended IFC! investment' m period
,
G.Sec. withIFCI7 years 9% (133.91) 6% : 139.01 5.1910 years 9% (133.91 6%
,
182.87 48.96IS years 9% JI33.91) 6% , 240.83 106.92
S. You would therefore, kindly appreciate that the proposedrestructuring with shifting of maturity date by IS ~ of investments byEPFO will not only go a long way to make our operations sustainable in thelong run but also augment the cause of provident fund ~y improving its returns.As we are not seeking further exposure from EPFO but only restructuringexisting liabilities, we shall be grateful to have your ~pprovaI at the earliest.We will be arranging the payment of interest overdues of Rs.72 crores as on31.3.2002 immediately on hearing a favourable reply from you while we .propose to pay the restructured interest due of Ris.96,19,03,SOO for thefinancial year 2002-03 in 4 quarterly instalments beginning from April, 2003.
Thanking you,
Encl: As stated
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Yours fatt~ly,
~
It.o\!.·\'I..{. I .If ,/
I(R.M. Mal1a)Executive Director
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Profitability Projection for EPFO(Reinvestment for: 7 Yr
The calculations are as at 1st April 1001
Ai
Loss to EPFO due to restructuring @ 9.50% for 2002-03 and @ 9.0% from 1st April 2003!
(
c'Year Amount PV Factor P~ntValue
I 2002-03 -102.953.000 0.94340 380,144,34022003-04 360.072.500 0.89000 : 320,463.24332004-05 350.072.500 0.83962 i 293.927.62142005-06 272-"47.S09 0.79209 I 215,803.938S 2006-07 -46.9IS.500 0.74726 3S.057,99162007-08 -46.915,500 0.70496 " 33,073.57672008-09 ~.877.5OO 0.66506 I . 31.176,21S82009-10 -'6.877,500 0.62741 29,411,523Total Present Value of Loss 1,339,058,448
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C( B Profit from Reinvesting @ 9% is • vis long term interest rates 'f 6%
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Year Amount PVFactor preisent Value1 2002-03 17542000 0.94340 I 16,549,056.6022003-04 53391000 0.89000 47,517,799.9332004-OS 59400000 0.83962 ' 49,873,38SAI42OOS-06 1393SOOOO 0.79209 I 1l0,378,2S1.9752006-07 268860000 0.74726 I 200,907,832.3662007-08 268860000 0.70496 189,S35,690.9072008-09 268884000 0.66506 ,178,823,216.9482009-10 268884000 0.62741 'i 168,701,148.0692010-11 248S83000 0.59190 ! 147,135,895.7610 2011-12 242574000 0.55839 I 135.452,054.62II 2012-13 162624000 0.52679 ' 85,668.294.5312 20B-14 33114000 0.49697 16.456,643.5113 2014-15 33114000 0.46884 15,525,135.3814 2015-16 33090000 0.44230 I 14,635.738.9115 2016-17 33090000 0.41727 ! 13,807,300.86
Total Present Value of Profits i 1,390,967,446
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B-A Net Profit 51,908,998
•. -EPFO_CALCULATIONS JAIJxls
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Cash Flow to the EPFO at Rcinveshnent9.00~.
1001001lOO2-OJ 1CH1.l-04 2014-85 200'-" 2006-411 1087'- lOOI-e9 200t-IO TOTAL(0Wrd•••,
.u.oantDue 501200000 117l500000 200J00000 lCi65000000 4317000000 0 I00008 • 1103000000 lOO658OOOGO
CasII Flow in lOO2-()3lian47614000 4161 •••••.s%
jCuh Flow in ~ from45108000 IlS06SOOO 160173000
CasII Flow in ~5 lian45108000 1lS065000 11027000 I 11l200000~
Cash Flow in ~ Iiom45108000 l1S065000 11027000 239150000 ! 411105OOGO,
!CUb Flow in 2Q06.07from45108000 IlS06SOOO IIOZ7OOO 2J9ISOOOO 388530000 lO658000O~ ,
IO'ih Flow in lOO7-08 Iiom ,
ICkI58000045108000 1l506SOOO IIOl7OOO 2391SOOOO 388530000 0 ,reinvcstmenullI ,
. ~Flow in~1iom4'108000 llS06SOOO IIOl7OOO 239150000 388530000 0 " 72000 106Ci5l008
IO'ihFlow in 1009-10 Iiom45101000 llS06SOOO 11027000 2391SOOOO 388530000 o ':72000 0 106Ci5l008
IC-hFlow in 2010.11 from18027000 2391SOOOO 388530000 o '[72000 0 99270000 74574900t
Cash Flow in lO1I·121iom2391SOOOO 388S3OOOO 0 !72000 0 99270000 727711000
Cash Flow in lO12-13lian ,
388S3oooo 0 :12000 0 99270000 481172_~Cash Flow in lO1J.14lian ,
q !72000 0 99270000 !l9J4lOOO
Cash Flow in 2014-1 S lian',72000 0 99270000 !l9S4lO8O
Cash Flow in lO1S-161iom0 99270000 991700C10!re .~
Cash Flow in lO16-171iom ,99270000 99170000!reinvestmenuIiI I
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Cash Flow to the EPFO at Reinvestment6.00%
:rMI.nlOO1-03 lOOl~ 1004-05 ~ 2•..• ' 200'''' 2~ ZOO9-I. TOTALtOftnI~l
5tllOOOOO 117l5OGGGO 21M13OOOOO 2665000M 431700000II a IOMGO • 1103000000 lOO65IOOON~Due
Cull Flow iIl2OOl-031iom~72000 lG0720H.5%
Cab Flow iIl2003.()41iom30072000 76710000 1061I2Ht
'7*Flow iIl2Q04..()S Iiom30072000 76710000 12018000 llnooeot
fCah Flow iIl2005-061iom30072000 76710000 12018000 IS9900000 178100000
Cab Flow iIllO()6..()71iom)0072000 76710000 12018000 U9900000 2S9020000
,, 5371lOH1
Cab Flow iIllOO7~ fi'Illn)0072000 76710000 12018000 U9900000 2S9020000 0 5371l0ee0
CabFlowill~fi'IllnlG072000 76710000 12018000 IS9900000 2S9020000 0 41000 53776I00I
Cab Flow iIllOO9-lO fi'Illn ;oanooo 76710000 12018000 IS9900000 2S9020000 0 41000 0 5377_
Cash Flow ill 201~II frcm12018000 lS9900000 2S9020000 0 41000 0 66180000 4971660M
~ Flow in 2011·ll frcmIS9900000 2S9020000 0 41000 0 66180000 451•••••
Cab Flow ill 2012-13 frcm2S9020000 0 41000 0 66180000 32U48OOt
Cab Flow iIl20IJ.14lian o II 41000 0 66180000 66ll8OM
Cab Flow in 2014-IS lian\41000 0 66180000 662l8OOI
CabFlowill20IS-16fi'1lln0 66180000 66180_reinvestmcat@9%
!Cash Flow ill 2016-17 frcm I66180000 6611GOOOI~
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IFCILtd.Profitability Proi~tion for EPFOCReinvestmentfor 10trsThe Calculations are as at 1st April 2002
~ .Lossto EPFO due to restl1lcturing@ 9.50% for 2002-03 pd @ 9.~%from 1st April 2003
Year Amount PVFactor Pre$ent Value12002-03 402,953,000 0.94340 1380,144,3402 2003-04 36Q.072,5OO 0.89000 ',320463,24332004-05 350,072,500 0.83962 a93927,62142005-06 272447,500 0.79209 ~15,803 9385 2006-07 46,915,500 0.74726 '35,05799162007-08 46,915,500 0.70496 I 33,073,57672008-09 46,877,500 0.66506 i 31,176,21582009-10 46,877,500 0.62741 I 29;411,523Total Present Value of Loss 1~39,oS8,448
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!! Profit from Reinvestinl@ 9% is a vis JODI term interest rates of '1Year Amount PVFactor Presc DtValue
12002-03 17542000 0.94340 1~S4~05722003-04 53391000 0.89000 ~7,517,80032004-05 59400000 0.83962 ' 9,873,38542005-06 139350000 0.79209 110378,25252006-07 268860000 0.74726 2PQ,907,83262007..Q8 268860000 0.70496 1 9,535,69172008-09 268884000 0.66506 178,823,21782009-10 268884000 0.62741 1 )8,701,14892010-11 301974000 0.59190 1 8,737,94710 2011-12 301974000 0.55839 1 is,620,70411 2012-13 301974000 0.52679 1 9,076,13612 2013-14 248583000 0.49697 1 3,538,13513 2014-15 242574000 0.46884 1 3,728,15714 2015-16 162624000 0.44230 1,928,75215 2016-17 33II4000 0.41727 3,817,31516 2017-18 33114000 0.39365 1~,035,20317 2018-19 33090000 0.37136 1~,288,44918 2019-20 33090000 0.35034 11,592,876
Total Present Value of Profits 1,828,650,057
B-A Net Profit
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48f,s91,609
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1m CALCULATfONS JAJ to.a,I - - --;_ ~
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Cash Flow to the EPFO at Reinvestment9.00%
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11001-02 I
(Owrduc\200J.0.1 lOf1J.OC 1~ JOO5.86 1006-G7 lOO7-O1 '2OOI-e %009-1. TOTAL
"--'DIM SOUOOOOO 1278500000 20C138000G U65000000 41178I0000 0 lO000O 0 118300000II I~
CashFlow in 2OOU)3 /iom47614000 , 47614000.5%
~ Flow in 200J.04/iom 4S108OOO 11506SOOO 160173000
Cashn..'i in 2OO4-OSfrom45108000 11S06SOOO 18027000 \ 178200000. ~
CashFlow in 2005-06 from4S108000 115065000 18027000 2398SOOOO " 418050000~ ,
CashFlow in 2O()6.Q7 /iom4S108OOO l1S065000 18027000 2398SOOOO 381530000 i I06S8OOOO
" ,
Cash F10w in:lOO7~ /iom45108000 11506SOOO lS027000 2398SOOOO 388530000 0 I I06S8OOOO.
Cash Flow in ~ from45108000 llS06SOOO lS027000 2398SOOOO 388S30000 0 ,72000 I 1ICN6S1000
~ Flow in 2009-10 from 4S108OOO IIS065000 18027000 239850000 381530000 0 72000 l 0 1ICN6S1000~Cash Flow in 2010-1J li'om
4S108OOO llS06SOOO 18027000 2398S0000 388S30000 0 72000 ! 0 99270000 905912000%
Cash Flow in 2011·llli'om4S108OOO 115065000 18027000 239850000 388530000 0 72000
I0 99210000 9059l2000.
c.shFImr in 2012-13 li'om45108000 llS06SOOO 18027000 2398SOOOO 381S30000 0 72000 I, 0 99270000 !IOS9l2000
% I
~FIow in 2013-14li'om18027000 2398S0000 388530000 0 72000 0 99210000 745749000
"c.sh Flow in 2014-15 li'om2398SOOOO 388530000 0 72000 0 99270000 727722000
%c.sh FJmr in 201S-16li'om
388530000 0 72000 0 99270000 487872000
~ Flow in 2016-17li'om 0 72000 0 99270000 99342000
"c.sh Flaw in 2017·18 from 72000 I 0 99270000 993.42000
c.sh Flow in 2018-19 from0 99270000 99170000
"Cash FImr in 2019-20 from99270000 99170000~. /0
-~
,)
EPFO_ C4.LCULi.170NS J-!i _JO.x/s: -
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IFeI Ltd.
Cash Flow to the EPFO at Reinvestment6.00%
200I-8llOOl~ ~ ~5 2005-06 ~ 2007 ••• ~ :009-1. TOTAL
(o-due)I
AmMDtDue 5OUOOOOO 1171500000 2OOlMOOO 2''' •••• 00 4S17tOOIOO • •••• • 1103000000 10065800000
CISb Flaw in ::10024) tiom30072000 I 30072000~.s"
CISb Floor ill 2003-04 tiom30072000 76710000
I
~ I 106711000
CISb Floor q, JOO4..OS tiom30072000 76710000 12018000 118800000mn_mC.~~ CISb Flow ill 2OOS-4l6 tiom30072000 76710000 12018000 1S9900000 278700000
; ~ ~ ill 2006-07 tiom30072000 76710000 12018000 1~ 259020000 5377lOOOO
CISb Flow ill 200MI tiom30072000 76710000 12018000 1S9900000 259020000 0 537nOOOO
-, ICasb Flow •• 2001-09 tiom30072000 76710000 12018000 1S9900000 259020000 0 48000 537768000. .~
CISb Flaw ill lOO!J-IO tiom30072000 76710000 12018000 1~ 259020000 0 48000 0 537768000
~ Flow ID 2010.11 tiom30072000 76710000 12018000 1S9900000 259020000 0 480001 0 66180000 6113948000
. Cab Flow ill 2011-121iam30072000 76710000 12018000 J~ 259020000 0 48000' 0 66180000 6113948000
"~
~Flow ill 2012-13 tiom30072000 76710000 12018000 IS9900000 259020000 0 48000 ! 0 66180000 6113948000
Cab Flaw ill 2013-141iam12018000 1S9900000 259020000 '0 48000 0 66180000 497166000
j Cab Flaw ill 2014-1 S 1iamIS9900000 259020000 0 48000 I 0 66180000 485148000
(" CISb Flow in 201S-161iam480001,~~ 259020000 0 0 66180000 315248000
r ~ Cash Flow in 2016-171iam48000 I 66180000rcinwstmenI@9% 0 0 Ci62l8000,
Cash Flow in 2017-18 tiom48000
1.~ 0 66180000 66228000
'-"" Cash Flow in 20111-19tiom 1 0 66180000 66180000-j Cash Flow in 2019-20 from
I 66180000 66180000~1@9"" 1
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IFCI Ltd.
Profitability Projection for EPFO(Reinvestment for 15 YrisII,
The Calculations are done as at Ist April 2002,
do Loss to [PFO due to restructuring @ 9.50% for 2002-03 and (i) 9.0r. front I It April 2003
Year Amount PVFactor Present V lue1 2002-03 402,953,000 0.94340 380,1<14,34022003-04 360,072,500 0.89000 320,4< 3,24332004-05 350,072,500 0.83962 293,~.!\7,62142005-06 272,447,500 0.79209 215,SC3,9385 2006-07 46,9 Is.soo 0.74726 35,0517,99162007-08 46,915,500 0.70496 33,0713,57672008-09 46,877,500 0.66506 3I.l7~,21582009-10 46,877,500 0.62741 29,41.,523Total Present Value of Loss 1,339,05$,448
! Profit from Reinvesting @ 9.". is a vis long tena interest rates of 6% 'I
I
Year Amount pY Factor Present Value I12002-03 17542000 0.94340 16,54?,05722003-04 53391000 0.89000 47,5ruOO3 2004-05 59400000 0.83962 49,873 38542005-06 139350000 0.79209 110,3781.25252006-07 268860000 0.74726 200,907 83262007-08 268860000 0,70496 189,535 69172008-09 268884000 0.66506 178,823 ~1782009-10 268884000 0.61741 168,70 l{l489 2010-11 301974000 0.59190 I78,737j94710 20U-12 301974000 0.55839 168,620,704II 2012-13 301974000 0.52679 159,07~•.13612 2013-14 301974000 0.49697 lSO,071, 2713 ~014-15 301974000 0.46884 141.577, 19514 2015-16 301974000 0.44230 133.563, 9115 2016-17 301974000 0.41727 126,003,. 9916 2017-18 301974000 . 0.39365 118,870,~4317 2018-19 248583000 0.37136 92,314,$8118 2019-20 242574000 0.35034 84,984, 9519 2020-21 162624000 0.33051 53,749, 4820 2021-22 33114000 0.31180 10,325, 0221 2022-23 33114000 029416 9,740,(\6222 2023-24 33090000 0.27751 9,182,64422 2024-25 33090000 0.27751 9,1~2,6~
Total Present Value of Profits 2,408,287, \00
B-A. Net Profit t,069,228,8f2I,
\
1 :) 110, I
IFCI Ltd.
Cash Flow to the [PFO at Reinvestment'.000/.
ZOOI.m 2002-Ol 20QS..G( 20CU-8S 2OIS46 20CJ6.e7 2007'- 2~ 2OOt-iO TOTAL(Overdue)
2U5OOOOO1 .&J17000000 0 - 0 IIIUOOOOIICI 10065800000"--Dae 501200000 1278500000 200300000
Cesh FJo.r in 2002-03 &em47614000 47614000
·~.S%~ •• 2003-04 &em 45108000 115065000 160113000!mi.;.~Cesh FJo.r illlOO4-OS &em
45108000 115065000 18027000 171200000re~ACesh FJo.r in 2005-06 &em
45108000 115065000 18027000 2398SOOOO 411JO!OOOO
Cesh FJo.r at 2OQ6.m &em45108000 l1S065OOO 18027000 2398SOOOO 318S30000 806580000
re~Cesh FJo.r •• 2007-08 &em
4S108OOO IlS065000 18027000 239850000 318S30000 0 806580000K
Cesh FJo.rin~ &em4S108OOO 115065000 18027000 2398SOOOO 318530000 0 72000 1IOU52000
KIc..b FJo.r •• 2009-10 &em45108000 115065000 18027000 2398SOOOO 388S30000 0 72000 0 1IOU52000~
[<:ash FJo.r in 201().J1 &em4S108OOO 115065000 18027000 2398SOOOO 311530000 0 72000 0 99270000 905922000
~ACesh FJo.r in 2011- I2 frcm
4S108OOO l1S065OOO 18027000 2398SOOOO 318S30000 0 72000 0 99270000 9OS!I22000~Cosh FJo.r in 2012-13 &em
4S108OOO 115065000 18027000 2398SOOOO 388530000 0 72000 0 99270000 905922000~Cash FJo.r in 2013-1" frcm 18027000 2398SOOOO 388530000 0 72000 0 99270000 145749000reinveslmcsfii9"ACesh Fto- in 2014-15 &em
239aSOOOO 388530000 0 72000 0 99270000 nm2000re~ACesh Fto.- •• 2015-16 &em
381530000 0 72000 0 99270000 487872000rcin~Cesh F•••• in 2016-17 frcm
0 72000 0 99270000 99342000~Cesh FJo.r in 2011-1l1 frcm
72000 0 99270000 !l!l342000reinvestmc::ca9Cesh F"'- a. 2018- I9 frcm
0 99270000 99Z70000r~A~fkoo-lII201 9-20 !-em II 99270000 99Z70000rc~A
~.-; -
r\
.-& 21
IFCI Ltd.
Cash Flow to the EPFO at Reinvestment6.00%
aOOI-Gl,
200l-Ol 200J~ 200...s 2005-06 2CMJ6.e7 lOO7~ 2001-49 20OP-I. TOTAL(Owrdue)I
~Due SOllOOOOO 1271SOOOOO 200J00000 266SOOIIOI 4317000000 0 ••••• 0 1103000000 lC106580000e
!CashFlow in2OOUI3 ficm30012000
Ii3OOnooorcimlaIIDelIIfil8.5%
Cash Flow in~ficm30012000 76710000 106712OGO
I
~ w.lOO4-OS &an30012000 76710000 12018000
I11l800000I
Cash Flow in200S-06&an30012000 76710000 12018000 159900000 " 271700000~
Cash Flow ill 20015-07&an30012000 76710000 12018000 159900000 2S9020000
,537720000~
!Cash Flow ill 2007-48 ficm30012000 76710000 12018000 U9900000 2S9020000 0
,53moooe
CashFlowill~ ficm30012000 76710000 12018000 159900000 2S9020000 0 4~ 53716I00I
Cash Flow ill lIlO9-10 &an I30012000 76710000 12011000 1S9900000 2S9020000 0 ~ 0 537161000
Cash Flow ill 201().\1 ficm30012000 76710000 12018000 IS9900000 2S9020000 0 48000 0 661I0000 68394000,
Cash Flow ill 2OU-12 ficm30012000 76710000 12011000 IS9900000 2S9020000 0 48000 0 661I0000 68394000
Cash Flow ill lOll-I) ficm30012000 76710000 12018000 IS9900000 2S9020000 0 ~ 0 661I0000 683!141000~
, Cash Flow ill 2013-14 ficm12018000 IS9900000 2S9020000 0 4IOOd 0 661I0000 497161SOOf
Cash Flow ill 2014-1S &omIS9900000 2S9020000 0 ~ 0 66180000 4851 .••• 09
'~
casb Flow ill 2015-16 &om2S9020000 0 ~ 0 66180000 3252 .•••••,~
Cash Flow ill 2011>.17&om
~ 0 41QOO 0 661I0000 66llIOOO
!Cash Flow ill 2017-11 ficm41000 0 66180000 66llIOOO~
iCash Flow ill 2011-19 &om
0 66180000 66180000
~~ 2Oi9-20 &om66180000 66180000~
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( Details of Amount outstanding in n"5p«t oITrustttS EmployttS Proddrnr Fund outstllDdin~ as on 3113102 and principal ~7. rep.ym~Dt schedule.,
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Scnco SUb i'mount INIT •••••• Dole [Tenure Princ:ipoI2002.oJ -... 2OIll.oJ I_*Z. PrincipoIi _ 2G03-04 I_ZIt,). 1'rin<ipoI2OO4.(IS
Cod< O~.5% N~
I.
12 15 jelOOOOOO 16.00 21IY11I97 0 I
26 J} 2OOOOOOOO U.OO lIl/lm 5 YEARS - I!IOOOOOO lOOIlOO!IOD - 18000000
22 15 mooooo 14.25 71»'11198 7 YEARS 1\25001 41_ I 712JOOO COOOIlO 0
2J I' 2~ 14.00 61»'1998 7 YEARS llOOOOOO ~ , 3500000O 22500000
D IS ~ 1,(,00 mwlll98 7 YEARS 3lOOOOOII 2mIIIIGI I 3!000000 22500000
22 J} 700000OO 14.25 71»'11198 7 YEARS 9mOOO 66_ 9975000 6300000
12 IS 1200000 16.00 21IY11I97 0 C 0
17 U ~ 13.00 IClIIYI997 7~_ - ."... I - COOOOOO . !iOOOOOOOO
17 IS 2OOOOOOOO 13.00 1000SII997 7~_ :llI0OOOOO 1- l6CIOOOOO 18000000 2OOOOOOOO
17 I~ )00000OO 13.00 IClIIYI1I97 7 years J!!OOOOO ~ 3900000 2'l1lOOOO 300000OO
J7 IS SOOOOOO 1:UO 1113011997 7years 625000 nsooo 625000 ~ SOOOOOO
20 IS - 13.7j 112S'11I98 10 YEARS ""'" - 55000 36000
20 IS 400000 13.75 1125111198 10 YEARS S5000 - 55000 36000
23 15 2500000OO 14.4j 7131111198 1 YEARS 36125000 237_ 36125000 22500000
23 IS 2._ 14.45 1131/11198 1 YEARS 36125000 2mOOOO 36125000 22500000
23 IS 2_ 14.45 7131/1998 7 YEARS 36125000 ~ 36125000 22500000
23 IS 2._ IH5 7131/11198 1 YEARS 36125000 ~ 36125000 22500000
II IS 300000 16.00 11130111196 1 YEARS - :&1IICI JOOIJQ(I 0
25 15 2SOOOOOO 14.20 11130111198 7}'fan. 3550000 :tJ"- ,3550000 • 2250000I
25 15 - 1420 111301191l8 1 yellS 1\0000I -- 1100000 4SOOOOO
25 15 100000000 14.25 1131/19119 1years 14UlOOfI 9_ 142S0000 900000O
25 IS 2500000OO 1,(,20 11I3OI19Il8 1 years - nnoooo 35SOOOOO 22500000
25 15 100000000 14.25 12I31/19Il8 7 years 14250000 ~ 142S0000 900000O
22 J} - 1.t25 712Cl1191l8 1 YEARS 1\2S000 ~ 1\25000 4SOOOOO
15 15 I_ Il.SO 9I3ClIl997 5 YEARS 1500000 150000I 1140000 0
15 15 700000O 12.50 9I3ClIl997 SYEARS 1IIC)OOO() iIlOOOOII 5320000 , 0
11 15 100000000 12.75 1Il30l11197 7 years Iznoooo 9SOOOOO 0 100000000
IS IS - 12.so 1IOQI1991 Is YEARS 2OOOOOOOO ~ I_ • 0 0 0
27 IS li_ 14.10 YlI/I9119 7 YEARS lI17SOO 2612500 3817500 247S000
17 15 400000OO Il.SO 1113011997 7 years SOOOOOO 3ll00OOO 0 400000OO
17 IS ~ 12.15 111301J997 ~yeon 63730000 41SOOOOO 0 5OOOOOOOO
25 IS 100000000 14.25 12I31/191l8 1ye11S 14250000 ,- 14250000 900000O
21 IS l500O0O 14.10 YlI/I9119 1 YEARS 1198500 IOnoo 1198500 705SOOO
27 15 2.'IlOOOO IUO YlII19119 tlYEARS 3S2SOO 231500 3~ 225000
28 IS 10000000 13.25 611/19119 10 YEARS 0 13250009_
1325000 900000 0
28 15 2500000 13.25 617/19119 10 YEARS 331250 Dnoo 331250 225000
28 15 2!100000 13.25 611/19119 10 YEARS 265000 190000 265000 1I0000
27 IS 600000O 14.10 YlIlI9119 1 YEARS - S7IIOOO 146000 S40000
28 IS 3_ 13.25 611/19119 10 YEARS 463150 3ruOO 463750 315000
r---2: 15 100000000 14.25 1131119119 1 years 14250000 950000I 142S0000 900000O2.@ IS 19'"f.IOOOOO 13.25 611/19119 10 YEARS 25115000 11050000 25175000 17100000
28 IS 100000000 13.25 611/19119 10 YEARS 13250000 9SOOOOO 13250000 900000O
17 15 IC~·»OOOO 12.50 1I/lCl111197 7 years 12500000 9SOOOOO 0 100000000
21 15 2(':00000 14.50 1'2511998 5 years 2OOOOOOOO 2900000O 19000000 021 15 IC'Z.)J()OO 14.75 3!2YI998 5y •••• 100000000 14750000 9SOOOOO 0
2. " ~:·:90000 rs.oo 3/2YI998 7y •••• 7_ ·n~ 750000G 4500000 soecooce27 15 15-:'X"JQOO 14.10 131119119 7 YEARS 21150000 1~250000 21150000 1350000027 15 I r·)X,JOOO 14.10 ),3111999 7 YEARS 15510000 l04mOO 15510000 990000027 15 5o:':'JOOOO 14.10 331119119 7YE .•••RS 7050000 ~750000 iOSOOOO ~50000027 Il r socooo 14.10 1'3111999 7 YEARS 3817500 2012500 3877500 247500028 15 IC-:':OJOOOO 1J.25 6I7/lm 10 YEARS 13250000 9SOOOOO 13250000 900000O28 15 IC('))JOOO 13.25 0,'111999 10 YEARS 13250000
9_13250000 900000O
28 15 -')),)JOOO 12.75 6'7/1999 5 YEARS 8925000 0050000 8925000 0300000 ':"OOOtJOOO
22 15 J50))))()()() 14.25 7"2011998 7 YEARS 21375000 1.t250000 21375000 1350000021 15 2:,-:O))j()()() 14.90 3'2511998 5 rears 2~ 37250000 n:'50000 I 021 15 20(').JOOQ 14.75 3·2511998 5 ye8IS 2OOOOOOOO 29_ 19000000 0H 15 2O':;')-JOOO 14.25 1.'3111999 7 years 28500000 19000000 , 28SOOOOO 1800000027 15 25-:(')j()()() 14.10 :131119119 7 YEARS 35250000 23iSOOOO 35250000 2250000027 15 25(('):)0()() 14.10 ),'3111999 7 YEARS 3S25OOOO 23750000 I 35250000 1150000027 ~5 lc.,-:·)))()()() 14.10 ).'3111999 7 YEARS 14100000 9SOOOOO 14100000 900000O28 IS 2~~':~j()()() 13.25 6.'711999 10 YEARS 33125000 23750000 33125000 ·2250000028 15 l.t:':·X(I()() J3.25 6'7/1999 10 YEARS 19212500 lJi75000 19212500 1305000028 15 ICO):~JOOO 1325 6-7/1999 10 YEARS 13250000 9_ I 13250000 900000O28 I, 1,z·:·)')Q()O 13.25 6,'dim 10 YEARS 13150000 9500000 13250000 900000O28 15 7(/))Y.)()() 12.75 0/7/1999 5 YEARS 0 8925000 0050000 0 I 8925000 '0300000 70000000
~ 15 25((1)):)0() 14.25 ":2011998 7 YEARS 35025000 23/50000 35025000 12500000
22 15 9(/))JOOO 14.25 ""1011998 7 YEARS 12825000 8550000 , 12825000 810000015 15 2',('):;'JOO 12.50 9'30.'1997 5 YEARS 200000OO 2500000 1900000 0 022 15 1(<:·:0:--000 14.25 7,'2011998 7 YEARS 14250000 9500000 14150000 900000O17 15 5(0(((,).)00 12.50 11 "3011997 7 years 62500000 -17500000 62500000 45000000 5OOOXolJOO20 15 5Q(-:·X·)()() 13.50 l.'1511998 7 YEARS 67500000 4"SOOOOO i 67SOOOOO 45000000 500C"lOOoo
2J 15 19:4:I)y')()o 14.10 !Q'"3I1I99& 1 YEARS 11150000 14250000 21150000 13SOOOOO15 15 3Q(oj))):;"JO 12.50 9.'30/1997 SYEARS JOOOOOOOO 37500000 18_ 0
10,005. ___0 1278500000 1J17U25OO 914289500 200300000 /039194500 679112000 2665000000
(
r .'Series Sub Inlcr<>l 2004- 1_- PIincipoI200S- _lOOS46 1_2MS- ~
__ 20CJ6.071- PmcipoI _ 2007-08 I_~ PMoipoI
Code O~ 05@'% 06 K®'% 2OCJ6.07 2tK- 2007-08 DI~ 2OCl84)
07,!~I
12 15 !16 U 0 0 0 0 -'- 022 15 7125000 4300000 mooooo 7IUIOO 4lOOOOIl 0 0
23 U 3JOOOOOO 2llOOOOO 2500000OO 3500000O 22500000 0 0
23 IS 3SOOOOOO 2llOOOOO 2500000OO 3500000O 22500000 I 0
22 U 9975000 6JOOOOO 700000OO 9975000 6300000 0 0
12 IS 0 0 I 017 15 6500000O <l500O0OO 0 0 0
17 U l6000000 18000000 0 0 0
17" U 3900000 21IJOOOO 0 0 0
~'F' 15 6lSOOO <I5000O 0 0 0
20 15 5SOOO 36000 5SOOO 36000 5SOOO 36000 ~ 5SOOO 36000
20 IS 5SOOO 36000 5SOOO 36000 55000 36000 -~ ~SOOO 36000
23 15 36IU1OO 2llOOOOO 2500000OO 36IU1OO l2500000 .s 023 IS 36llSOOO 2llOOOOO 2500000OO 36llSOOO l2500000 0 023 IS 36llSOOO 2llOOOOO l50000000 36125000 l2500000 0 I 0
23 15 36llSOOO 2llOOOOO 2SOOOOOOO 36125000 l2500000 0 0
11 IS 0 0 0 025 IS 35SOOOO 22SOOOO l5000000 35SOOOO 22SOOOO ( 025 IS 7100000 <l500O0O SOOOOOOO 7100000 4500000 0 0
25 IS 14l5OOOO 900000O 100000000 14250000 - 0 0
25 IS 35SOOOOO 2llOOOOO 2500000OO 35SOOOOO l2500000 0 0
25 IS 14l5OOOO 900000O 100000000 14250000 - 0 0
22 IS 7125000 <l500O0O SOOOOOOO 7125000 4500000 0 0
IS U 0 0 I 0
IS IS 0 0 0 0
17 IS 0 0 0 0
IS IS 0 0 0 0 0 0 0 027 IS J877500 2475000 27SOOOOO J877500 2475000 0 017 IS 0 0 0 017 IS 0 0 0 025 IS 14l5OOOO 900000O 100000000 14250000 - 0 021 IS 1198S00 76S000 8SOOOOO 1198S00 76SOOO 0 027 IS 3Sl5OO 22SOOO 2SOOOOO 3Sl5OO 22SOOO 0 0:zs IS 132SOOO 900000 0 13lSOOO 900000 I 13lSOOO 900000 0 13l5OOO 900000 0:zs IS 331250 22SOOO 331250 22SOOO 331250 22."iOOO 331250 22.~JOO:zs IS 16SOOO IBOOOO 26SOOO IBOOOO 26SOOO 180000 26SOOO 18000027 IS - S40000 @O()OO 846000 S40000 0 0:zs IS 463750 315000 463750 31SOOO 463750 31SOOO 463750 31SOOO
ii-·, IS 142SOO1lO 900000O 100000000 14250000 - 0 0IS 2S175OOO 17100000 25175000 17100000 2517SOOO nooooo 2S17SOOO 17100)00
:zs IS I32SOOOO 900000O 132S0000 - 132S0000 900000O i l32!oOOO( 9OC.))()()
17 IS 0 0 0 021 15 0 0 0 021 I~ 0 0 0 021 IS
7_ 4_0 0 0
27 15 2IlSOOOO 13SOOOOO lSOOOOOOO 2llSOOOO 13SOOOOO 0 027 IS ISSloooo 9900000 110000000 15510000 9900000 0 027 15 7OSOOOO 4SOOOOO SOOOOOOO 7OSOOOO 4SOOOOO 0 027 I~ 3877500 247SOOO 27SOOOOO 3877500 247SOOO 0 028 IS 132SOOOO 900000O 132SOOOO 900000O 132SOOOO ~:ooooo 132SOOOO ~:((r)lX)
28 IS 132SOOOO 900000O 1)250000 900000O 132SOOOO ~":"JOOO I I32SOOOO ~)):,)j()
28 15 8925000 6300000 0 0 0 0 0 0 0 0 0 ('I
22 15 21375000 13SOOOOO ISOOOOOOO 21375000 13SOOOOO 0 I 021 15 0 0 0 I 021 15 0 0 0 025 15 28500000 18000000 2OOOOOOOO 28500000 18000000 0 I 0n 15 352SOOOO 22SOOOOO 2SOOOOOOO 3~2S0000 22500000 0 . 027 IS 3S2SOOOO 22SOOOOO 2SOOOOOOO 352SOOOO 22SOOOOO 0 , 027 15 14100000 900000O 100000000 14100000 900000O 0 I 028 IS 33125000 22SOOOOO 33125000 22SOOOOO 33125000 - .xsoooeo 1 33125000 225)))00
.28 15 19212500 13OSOOOO '19212SOO 13OSOOOO '19212500 1:;')5001)0 -'- 19212500 13Q~)))()
28 15 132SOOOO 900000O 132SOOOO 900000O 132SOOOO ~»JOOO I 132SOOOO !:loX'))()()
28 15 I32SOOOO 900000O 13250000 900000O 132SOOOO ~:-:<{iOO 1 I32SOOOO 9((:(('L'"()
28 15 8925000 6300000 0 0 0 0 0 0 I 0 0 o~'
15 35025000 22SOOOOO 2SOOOOOOO 35025000 22SOOOOO 0 0n 15 12825000 8100000 900000OO 1282SOOO 8100000 0 I 015 15 0 0 0 0 0 0 0 0 0 0 0 022 IS 141SOOOO 900000O 100000000 142S0000 900000O 0 017 15 62SOOOOO 4SOOOOOO 0 0 020 IS 07500000 4SOOOOOO 0 0 023 IS lllSOOOO 13SOOOOO ISOOOOOOO 21150000 13500000 0 0IS 15 0 0 0 1 0
1011194:;60 661122000 4117000000 760319500 487172000 0 146257_ ,- -99]42000 800000 ...,6257500 ".).41"000 0
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, . , I ~ d .. ri6' 1..-1 {Derails of Amount outstanding in respect oITrustt'e$ Employees Pro\idl'nt Fund outstanding as on J IfJ/O_ an prtacipa! '--
repa)ment schedule. I
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Details uf1!\mount outstanding in respect oITrustres Emplo)'HS Prcnideot Fund oUlStan1ing as on 3113102 and principal.' • rt'paymentsdKdule. I @_ 2008-09 1_ Principal 2009-10 1_ 2009-10 1_ 2_
zoos. IO~09.~
Series SubCode
(: 22 IS 0 0 ~ 2ll<ooooO
D IS 0 ~ I~DIS 0 0~1~
(
n IS 0 0 - lt9OOQOO12 IS 0 0 _~17 0 jQOOOOOOO 19~
11 IS 0 0 lIlOOOOOOO '100000O_r IS 0 300000OO 11"'00000'-;"r·7-·....!;IS~----~--...:oq...-----~----4----.!f---~soooooo~3--..:.:I::r=5000=t
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20 I 0 0 _ 330000
20 IS 0 0 _ 330000
nil 0 0 ~14-I.<ooooO
n IS 0 0 2SOOOOOOO 14-1.<00000c D I 0 0 2SOOOOOOO I~D IS 0 0 ~ l.umoooII IS 0 0 JOOODO -(
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2S IS 0 0 2SOOOOOO 1-1..'00000
2S IS 0 0 300000OO 2&IQOQOO
2S IS 0 0 100000000 roooooo2S IS 0 0 2SOOOOOOO I~
2S IS 0 0 JIlOOOOOCCI S'lOOOOOO(
(
nls 0 0 __
IS IS 0 0 1_ lmoooIS IS 0 0 700000O 7!JOOOOO
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( Item No. 7~- Revised accounting policy for JnvestmentsI
1. Para 51 of EPF Scheme, 1952 provides that all interest, rent and otherincome realized and net profits or losses, if any, from ~he sale of investments notilicluding therein the transactions of the Administrationi Account, shall be credited,or cebited, as the case may be, to an account called the "Interest SuspenseAccount", Brokerage and commission on the purchase' and sale of securities andother investments shall be included in the purchase or ~Ie price, as the case maybe, and not separately c~arged to the "Interest suspensr Account".
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2. As per Para 55 of Employees' Provident Fund S¢heme, 1952 Central Boardshall maintain its balance sheet in form XI which provides for recognition of incomedlsc'osure of investments. As per Schedule-vl, X & XV of Balance Sheet Schedule VIreflects investment income recognition and Schedule X & XV reflects assets(Investments) disclosure.
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INVESTMENT Fl.UCTUATION ACOUNT (Schedule Xl: ,(
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A. Gain on redemption of securities accounted fpr up to (Opening Balance)B. Gain on purchase of securities I
C. Interest on Fluctuation AccountTotal
Less:Loss on sale of securitiesBalance as on 31.03.200
INTEREST SUSPENSE ACCOUNT (Schedule VI)
Balance as. per last Balance SheetLess:
a.b.c.d.e.
Add:
a.b.c.d.e.f'I.
g.
Interest credited to members accountInterest paid on deposits refunded to exempted estabtishmentsInterest paid to vendors !
Interest accrued on SRFAccount adjustedInterest accrued on/fluctuation Account adjustedBalance in the Accounts to be credited to the subscribers' accounts up
ito 31.03. I
Interest reatlzed on investment of securities'.Ioterest on S. B. Accounts (Central)Interest on S.B. Accounts (Regional) !
Interest on securities received from the establishmentsInterest reallzed from members on loans !,
Penal damages on belated contributions receivedAmount of loss on sale of securities creditedBalance as on 31.03 .
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INVESTMENT ACCOUNT OF eMpLOYEES' PROVIDENT e.j,ND (Schedule XV)I
)A. Securities purchased centrallv (cost price)Balance as per last Balance Sheet
B. Securities transferred by Regions:Add:
(i)(ii)
Less:(i)
Add:(i)(ii )
Less:(i)(ii)
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Amount invested centrally (cost price)Gain on the purchase of securities
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Loss on sale of securitiesSecurities redeemed
Balance (A)
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Securities received (Accepted value)Other adjustments
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Securities returned to Establishments(Accepted value)
Balance (B)Total (A) and (B)
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2. Due to aforesaid accounting polides balance in the Investments Fluctuationaccount has turned negative in the Balance Sheet of, amployeesc_pension Schemeamount of which was (-) Rs. 2S8.44crores as on 31.03J2001 andI'Rs.614.46 croresas on 31.03.2002. In accordance with the continuing a~counting practice negativebalance in Investment Fluctuation Account as on 28.02.2003 will be more thanRs.12S2 Crores. Negative balances in our books of accounts have arisen mainlydue to observance of Balance Sheet format stated a~ove in a rigid manner andbooking of premium on purchase of securities in Investment Fluctuation Account.POsition deserves due analysis' and proper accounting p~actice so as to reflect truepicture of the investments.
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3. In accordance with the aforesaid format, tnvestments are being shown in thebalance sheet at the cost price. Loss on sale of securities is adjusted frominvestment fluctuation account to be buitt up on account 'Iofgain on redemption ofsecurities. Obviously, in the Scheme, it is not intended ~o disclose the investmentsat Face value i.e. other than cost of securities held and to show the investmentfluctuation account as negative balance on the liabilities side.
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4A. As evident from above formats, securities purchased are supposed to beshown at cost price and not at face value. There is no direct provision for bookingof premium paid on purchase of securities, service charge~ to portfolio managers onpurchase of securities alongwith service tax thereon, discount/premium on maturityproceeds, incentives received on purchases etc. So these :,itemsused to be adjustedunder the head Gain/Loss of securities out of purchase price of securities and in theinvestment fluctuation account as contra entries. Net result of deducting thepremium paid on purchase of securities from purchase price is to show thesecurities at face value. Under the administered Interest rates regime, it did not. ,
create any alarming situation because securities were I not being purchased atpremium. Now there is no other option but to buy th'ie securities at prevailingmarket rates. I
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4B. Amount paid for purchase of securities is not taken into investment account,and further maturity proceeds are credited to investment account on the basis ofactual receipts (which are equivalent to face value in general). It results in everincreasing investment fluctuation account" and with Inegative balances in thedeclining interest rates scenario. For example, if one 19t of securities having facevalue of 100 crores is purchased at 125 crores. And reJjnainingperiod for maturityis 5 years in respect of these securities, as per existing I practice 100 crores will bebooked at net cost price (125 crores -25 crores as loss Ion purchase of securities).Further, as contra entry, 25 crores will be debited !in Investment FluctuationAccount. After receipt of maturity proceeds of Rs.~OOcrores after 5 yearsinvestment account will be credited by 100 crores. So securlttes account will be NILafter maturity. But in Investment Fluctuation Account, ~he balance of Rs.25 croreswill always stand. As per the prudent market practice, this 25 crores amountrequires amortization out of interest income on this security @ 5 crore per annumfor 5 years. Otherwise it would cause misleading picture about investments in theBalance Sheet. I
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4C. Aforesaid requirement about amortization will i become more critical, ifGovernment of India allows CBT, EPFto sell securities. Tb ascertain correct positionon cost price and profit/loss on sale of securities, it is essential to ascertain the fairvalue of securities on the date of sale and fair value should be book value viz. costprice reduced by amortization till the date of sale.
~ist?te "eal &1 ebB tall'fr
5. Investment Fluctuation Account was started in the year 1984-85.year wiseand Scheme wise position of Investment Fluctuation Account is enclosed.
5. Apparent anomalies in the accounting of investments and income there fromhas resulted in confusion. Apparently, the balance sheet should reflect the truepicture of investments. Earlier, this issue had been raised by the Hon'ble Boardmembers. Problem regarding investment fluctuation ac¢ounting started mountingup after 1996-97 when the yield of investment begin to fall. In the falling interestscenario, payment of premium on purchase of securities was bound to go up.Although, total amount paid on purchase of securities 'S part of the cost but toreflect the securities at face value in the balance sheet: is improper. Differencebetween the cost price and face value continued to'! be charged as loss onpurchase/sale of securities in the balance sheet. In fact, in most of the years nosale of securities took place. It is apparent that format notlfied under the EPFScheme, 1952 as indicated above does not prohibit to show the true picture aboutthe cost price, loss on sale of securities, gain on sale of securities andpremium/discount on purchase of securities. Since, the Business Process Re-engineering is going on, Finance & Investment Cornrntttee in its 52nd meeting heldon 25.5.2001 advised that study report of Bhadra & Co., the then Portfolio Auditorbe forwarded to Siemens Information Systems Limited. Siemens InformationSystems Limited has in turn stated that whatever accounting policies Employees'Provident Fund Organisation wants to follow, be decided b~ it.
7. Neither there is any bar in the EPFScheme, 1952 nor CAG has restrictedabout adoption of prudent accounting practices. Further depiction of negativebalances in Investment fluctuation account of Balance Sheet of Employees' PensionScheme was a cause of concern for Actuary also.
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8. Institute of Chartered Accountants of India has issued accounting standard- C9 relating to Revenue Recogniza~ion and Accounting standard 13 relating to.Accounting for investments These accounting standards are being followed in the Ccountry as these are based on sound time tested pr~dential accounting practices.
9. To improve the position it is suggested to follow the enclosed (Annexure 2) ('accounting policy regarding investments accounting, in future, based on accounting ,standards issued by institute of Chartered Accountants of India. However, fer the ( )sake of clarity, it is reiterated as under: - '
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a) Investments be shown at cost price actually paid at the time ofacquisition of securtties inclusive of broker~ge, service tax and portfolio (',manager's charges etc. on acquisition. Any incentives received on purchaseof securities will be reduced from cost of acquisition accordlnqlv. (
b) Cost price of the securities includes deferred inflows on account of (interest whatever securities are purchased at premium i.e. at a price higher (than the face value. Difference between cost Price and face value will be £
amortized out of interest income credited to the concerned Fund vlz, .(Provident Fund/Pension/EDLI/SPF/Pension cum '\Gratuity Fund etc. Cost priceof investments as reduced by amortization wit, be treated as cost price for'" (carrying the investments. Amount of arnorttzation will be computed inproportion of number of days security was held during the year by C8T, EPF (to the total number of days from the date of ~urchase to date of maturity.Similar accounting treatment is recommended "for discount on purchase of (securities. However, it will be booked under the head "gain" on theredemption of securities by proportionate amount. (
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c) Since, entry equivalent to amortization amount will be done out ofhead 'Other Adjustments' in the schedule for investments, no separate fundis intended to be earmarked. Accordingly, interest on Fluctuation Account,'need not be shown. This practice be continued in future.
Investments be valued as under: -(i) Long term (Non-tradeable) At cost pri¢e after amortization effect(Ii) Current (Tradable) Lower of cost or fair value
e) Till notification of revised format of Balance Sheet, gain on redemptionof securities and loss on sale of securities may contmue to be shown in theInvestment Fluctuation Account. instead of adjusting them fromIncome/expenditure of respective schemes/funds.', Similarly, interest incomeactually received (not on accrual basis), loss on s~le of securities be continueto be shown in the Interest Suspense Account,alongwith interest paid tovendors at the time of purchase of securities. .
d)
10. Further, to reflect true picture about investments In the Balance Sheet as on31.03.2003 and in subsequent years, aforesaid accountin~ policy may be followed.
The matter is accordingly placed before Finance and, Investment Committee fordeliberation and decision.
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-YEAR WISE DETAILS OF INVESTMENT FLUCTUATION ACCOUNT (EPF)
Items credited to Investment Fluctuation Account Items debited to Investment Fluctuation Account
I Face Value-I Purchase price
Intt. On FluctuationPurchase price -
Year Opening Balance (Discount credited Account (Adjustment Loss on sale ofFV (Premium on Closing Balanceout of interest securitiesto Invest.
suspense account)purhcases)
FlyCluatioQBCcount} -- - -- _.- - - - --- It- .--- . r-I
1984-85 ,,,.00 2,19,63,524.07 2,19,63,524.07 I
1985-86 2,19,63,524.07 . 14,03,75,782.11 16,23,39,306.181986-87 16,23,39,306.18 33,04,09,684.26 49,27,48,990.44
1987-88 49,"27,48,990.44 20,43,84,432.23 19,27,81,432.47 50,43,51,990.201988-89 50,43,51,990.20 14,88,79,490.05 14,66,78,381.62 5,97,28,381.50 74,01,81,480.371989-90 74,01,81,480.37 19,59,03,417.03 8,88,21,777:60 1,48,35,369.50 101,00,71,305.50
1990-91 101,00,71,305.50 4,94,20,540.23 12,12,08,556.60 13,93,00,000.00 104,14,00,402.33
1991-92 104,14,00,402.33 7,94,65,451.37 12,49,68,048.00 ",.00 124,58,33,901.70
1992-93 124,58,33,901.70 7,34,81,837.21 14,95,00,068.00 ",.00 146,88,15,806.91-..1993-94 146,88,15,806.91 18,07,38,066.70 17,62,57,897.00 ,,,.00 182,58,11,770.61
1994-95 182,58,11,770.61 11,40,19,146.08 21,90,97,412.00 ",.00 215,89,28,328.69
1995-96 215,89,28,328.69 ,83,68,664.00 25,90,71,399.00 ",.00 242,63,68,391.69
1996-97 242,63,68,391.69 29,11,64,207.00 4,68,87,001.75 267,06,45,596.94
1997-98 267,06,45,596.94 32,04,77,471.63 ,,,.00 14,75,21,799.22 284,36,01,269.35
1998-99 284,36,01,269.35 34,12,32,152.32 ,,,.00 7,06,95,781.10 311,41,37,640.57
1999-2000 311,41,37,640.57 37,36,96,516.87 ",.00 54,24,54,786.00 294,53,79,371.44
2000-01 294,53,79,371.44 33,13,55,179.28 76,75,33,009.00 250,92,01 ,5~
2001-02 250,92,01,541.72 23,83,74,146.46 157,42,45,923.30 117,33,29,764.88TOTAL 2718,17,80,618.71 154,7-t..1Q...Q~4 3181903213.38 45,35,32,185.22 310,2~5_1,~98.62 .117,33,29,764.88.
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(.' ..EPS 1995 ACCOUNT NO. 11
Computation of Investment Fluctuation Account
Refund ofNet debit J credit
Gross cost Price of Service Tax Premium Refund of FV of securiteis to invest.Year
securitiesApplication Transaction fee
Transaction tax • Maturity bank chargesIncentives
purchased Fluctuationmoney . ; account
1996-97 2216,49,76,120.00 4,50,45,333.68 2212,80,41,634.42 8,19,79,819.26
1997-98 2784,15,18,949.50 2,51,04,384.98 2753,87,37,000.00 32,78,86,334.48 I
1998-99 3403,96,81,352.00 2,91,74,966.00 3400,15,98,000.00 6,72,58,318.00
1999-2000 3951,77,35,834.00 1,83,03,419.50 2,25,63,881.00 3859,47,66,000.00 96,38,37,134.50
2000-2001 4203,95,73,815.00 28,15,54,000.00 1,57,45,626.00 ,21,74,864.00 ,11,78,983.00 4062,69,30,000.00 114,34,81,594.00
2001-02 4803,91,49,388.40 29,14,86,000.00 1,20,08,106.00 ,4,49,758.00 ,30,00,000.00 ,53,10,384.00 ,8,18,261.00 4419,08,82,000.00 356,01,10,607.40
TOTAL 2136426,35458.90 57,30,40 000.00 ~~3,81~6.16 L-~~1!,619.QO _,3_0,00,000~OO ,74,85,248.00 ,19,97,244.00 20708,09,54,634.4~ 614i45i53iI!Ol·61 _
2,22,13,49,80,298.00 - 69,38,663.58 (3,41,37,58,359.00 - 3,42,06,97,022.58) l.e. Rrevious years adjustments diff. in Face Valueand cost price up to 31.3.96 has been booked in 1996-97 amounting Rs.69,38,663.58
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Year-wise Details of Investment Fluctuation Account
EPS 1~195Items credited to Investment Fluction Account Items debited to Fluctuation Account
Face Value - Purchase Purchase Price - FaceYear Opening Balance price Discount creditedto Value (Premium on Closing BlanceInvest Fluctuation
Account close of securities
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--- --- ---- -- 8.t9,1-a81~.2~L __ 8,19,19,819.261996-97 ------
1997-98 8,19,79,819.26 32,78,86,334.48 40,98,66,153.74,,-
1998-99 40,98,66,153.74 6,72,58,318.00 47,71,24,471.74
1999-2000 47,71,21,471.74 96,36,37,134.50 144,09,58,606.24
2000-01 144,09,61,606.24 114,34,81,594.00 258,44,43,200.24
2001-02 258,44,43,200.24 356,01,10,607.40 614,45,53,807.64
TOTAL 614,45,53,807.64
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Year-wise Details of Investment Fluctuation Account
Items credited to Investment Fluction AccountEDLI FUND
Items debited to Fluctuation Account
"IFace Value - Purchase Purchase Price - Face
Year Opening Balanceprice Discount creditedto Value (Premium ,pn Closing BlanceInvest FluctuationAccount
close of securities
1997-98 ",.00 ",.00 1,07,54,264.28 1,07,54,264.28
1998-99 1,07,54,264.28 ,47,05,866.17 ",.00 ,60,48,398.11
1999-2000 ,60,48,398.11 11,.00 2,33,22,159.00 2,93,70,557.11
2000-01 2,93,70,557.11 11,.00 3,81,40,796.52 6,75,11,353.63
2001-02 6,75,11,353.63 ",.00 11,32,52,344.70 18,07,63,698.33 I--_ .._- -
TOTAL ,47,05,866.17 __ 18,54,6S!,564.50 18,07,63,698.33 ,--- ---~-~ - - -~--- --
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/ EDLIAccountno.25Computation of Investment Fluctuation Account
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Refund of ServiceRefund of Net debit I credit to
Year Gross cost PriceApplication Transaction fee Tax Income
bank Incentives FV of securiteis invest. Fluctuationof securities Transaction Tax (TDS) purchasedmoney charges account, , tax *
1997-98 69,56,98,350.00 ,7,22,914.28 68,56,67,0:)0.00 1,07,54,264.28 I
f99a:-913- - - $-,G7-,oo,'l-98.00- - - -- -- -- -- - -- _,10.01.370.00 86,64,07,434.17 -,47,05,866.17
106,97,92,162.00 ,5,95,044.00 " 1,953.00- - -- 101/;,70,8T,OOO;OO I ---2,33i22T1-59.00...-~1999-2000
2000-2001 133,94,72,011.52 ,34,22,000.00 ,6,41,439.00 ,1,22,079.00 ,,30,575.00 129,63,98,000.00 3,81,40,796.52
2001-02 152,88,~8,154.70 ,24,63,5.00.00 ,5,65,493.00 ,,20,501.00 ,,26,804.00 141,37,31,500.00 11,32,52,344.70 '
TOTAL 549,45,50,876.22 ,58,85,500.00 ,35,26,260.28 ,,20,501.00 ,,1,953.00 ,1,22,079.00 ,.,57,,379.00 531,12,70,934.17 18,07,63,698.33 :
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*86,05,04,000 + 59,03,434.17 previous year adjustments regarding difference in Face Value & cost price upto 31.3.98amounting to Rs.69,70,14,900.00~69,11 ~11,465.83 :59,03,434.17
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be appropriate to recognise revenue only when It is: reasonably certain that theultimate collection will be made. Where there Is no uncertainty as to ultimatecollection, revenue is recoqntsed at the time of sale pr rendering of service eventhough payments aremade by instalments. ,An essential criterion for the recoqnltlon of reven~ is that the considerationreceivable for the sale of goods, the rendering of services or from the use by othersof enterprise resources is reasonably determinable. When such conslderatlon is notdeterminable within reasonable limits, the recognition offI revenue is postponed.When recognition of revenue is postponed due to the, effect of uncertainties, it isconsidered as revenue of the period in which It is properly recognised.
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4. Classification of InvestmentsEnterprises present financial statements that classify fjxedassets, investments andcurrent assets into separate. categories. Investments'! are classified as long-terminvestments and current investments. Current investments are in the nature ofcurrent assets, although the common practice mCi¥be to include them ininvestments. In EPFO,investments earmarked as tradeable by FA&CAOas per overalllimits and conditions prescribed by the CST, EPFbe treated as current investmentsand remaining investments to be held till maturity: be treated as long terminvestments. I,
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5. Cost of InvestmentThe cost of an investment indudes acquisition charges such as brokerage, fees,duties and Service tax etc.If an investment is acquired in exchange, or part exch~ge for another asset, theacquisition cost of the investment is determined by reference to the fair value of theasset given up. It may be appropriate to consider the fair value of the investmentacquired if it is more clearly evident.In case of acquisition of securities by CBT, EPF on cancellation of exemption,acquisition price of securities be regulated in accordance with Para 28 of EPFScheme, 1952. However, accounting and disclosure after .acqulsltlon will be governedby the proposed accounting policy.Interest, dividends and rentals receivables in connection with an investment will begenerally regarded as income, being the return on the investment. However, insome circumstances, such inflows represent a recovery of cost and do not form partof income. For example, when unpaid interest has accrued before the acquisition ofan interest - bearing investment and is therefore Included in the price paid for theinvestment, the subsequent receipt of interest Is allocated between pre-acquisitionand post-acquisition period; the pre-acquisition portion is deducted from cost.
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6. Carrying Amount of Investments.Current Investments .The carrying amount for current investments is the lowt;r of cost or fair value. Inrespect of investments for which an active market exists, market value generallyprovides the best evidence of fair value. The valuation] of current investments atlower of cost and fair value be adopted as prudent method of determining thecarrying amount to be stated in the balance sheet.Valuation of current investments on overall (or globaO basts is not consideredappropriate. More prudent and appropriate method :is to carry investmentsindividually at the lower of cost and fair value and the same be adopted in respect ofthe investments of the CBT, EPF. Further, any reducti'pn to fair value and anyreversals of such reductions be included in/adjusted 'from the income of therespective Schemes. !
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Long-term Investments• long-term investments are of individual importance to the investing enterprise. The
carrying amount of long - term investments will theretnre be determined on ailindividual investment basis.
• Long-term investments be carried in the Financial StatElments at cost price afteramo rtisatio n.
Annexure - II t>Proposed Investment Accounting Poliqr based on relevant
Accounting Standards to be adagted after BPR (;(I
1. Scope of Accounting Standards. ,Efforts will be made to Issue Accounting Standardsiwhlch are in conformity with theprovisions of the applicable laws, customs, usages ~nd. business environment of ourcountry. However, If due to subsequent amendments in the law, a particularAccounting Standard is found to be not In conformiW with such law, the provisions rt:'.the said law will prevail and the financial statements should be prepared inconformity with such law. '. .The Accounting Standards by their very nature can~ot and do not override the localregulations which govern the preparation and presentation of flnanctal statements inour country. However, the-Institute will determine the extent of disclosure to bemade in financial statements and the related Audltor's reports. Such disclosure maybe by way of appropriate notes explaining the treatment of particular items. such ( .explanatory notes will be only in the nature of clarification and therefore, need not betreated as adverse comments on the related financi~1 statements. ( )
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2. Revenue RecognitionUse of Funds of CBT, EPFby others give rise to:
(a) Interest - charges for the use of cash resources or amounts dueCBT, EPF; ,Dividends- rewards from the holding of In~estments in shares.
to the -( )
(b)
• Interest accrues, in most Circumstances, on the tlme basis determined by the amountoutstanding and the rate applicable. Usually, discount or premium on debt securitiesheld is treated as though it were accruing over the period to maturity. To be precise: ((a) CBT, EPFmay book income from Governrnentsecurttles, bonds including Deep
Discount Bonds and debentures of corporate bodies on accrual basis, where (interest rates on these instruments are pre-determtned and provided interestis serviced regularly and is not In arrears.CBT, EPFmay book income on accrual baslston securities of corporate bodie~••public sector undertakings in respect of whtch the payment of interest and (repayment of principal have been guarante~d by the Central Government or aState Government, provided Interest is servlced regularly and as such is not in (arrears. . ,CBT, EPFmay book income from dividend ion shares of corporate bodies on (accrual basis provided dividend on the shares has been declared by thecorporate body in its Annual General Meeting and the owner's right to receive (!payment is established.CBT, EPFshould not capitalise the Broken Period Interest paid to seller as part (Iof cost in case of cum-interest purchases but treat it as an item of paymentout of interest received/receivables in respect of investments in Governmentand other approved securities.
Dividends from investments in shares will not be recognised as income until a right ~to receive payment is established.Income Tax deducted at source out of interest/other revenues be booked as TDS ( ,Receivables for the respective year and Income T~x refunds be adjusted against thesame.Any service chargejTax etc. levied out of Interest/revenue collections be debited outof interest/revenue of the respective Fund.
(b)
(c)
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3. Effect of Uncertainties on Revenue RecogJ1ition!• Recognition of revenue requires that revenue is measurable and that at the time of
sale or the rendering of the service it would not be unreasonable to expect ultimate (collection. . 'Where the ability to assess the ultimate collection 1I#ithreasonable certatnrv is lacki!lg '\at the time of raistnq any claim, e.g. for escalation of price, interest etc. revenuereconrutron is postponed to the extent of uncertalritv involved. In such caSE::S, it rnav
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• Difference between the cost of acqulsltlon and Fa~ value of the investments beamortised on the basis of number of days over the period remaining to the maturity.
• Where there is a decline, other than temporary, in the carrying amounts of long terminvestments the reduction in the carrying amount qe charged to the income frominvestments of respective Schemes. The reduction t,ncarrying amount is reversedwhen there is a rise in the value of the Investments, or if the reasons for thereduction no longer exist. To be precise, a decline ~ther than temporary means aphenomenon where it is considered by the CBT, EPFthat even the Principal and theamount of interest accrued thereon will become Bad nebts,
• Regarding Mutual Funds Units, investment In quoted[ Mutual Fund Units should bevalued as per Stock Exchange quotations. Investment In non-quoted Mutual FundUnits is to be valued on the basls of the latest re-purchase price declared by theMutual Fund in respect of each particular Scheme. 111\case of funds with a lock-inperiod, where repurchase price/ market quote ls not available, Units could be valuedat NAV. If NAV is not available, then these could be valued at cost, till the end of thelock-in period. Wherever the re-purchase price is not: available, the Units could bevalued at the NAVof the respective scheme.
7. Short Term Parking of Funds in Treasury Bills: etc.• T-Bills are purchased at discount for parking the mone~ for short term to avoid idling
of funds. Interest on T-Bills is the difference of dlscounted price and Face Value.Since CBT, EPFdo not purchase T-Bills for trading purposes nature of investments inT-Bllls cannot be equated with tradeable lnvestments. Accordingly differencebetween the purchase price and Sale Price / Maturi~ Value be adjusted in theinterest realized on investments.
8. Reclassification of Investments ,• Where long-term investments are reclassified from longl'term to current investments
and Vice-versa, transfers be made at the lower of costlor fair value on the date oftransfer.
9. Disposal of Investments• On disposal of an investment, the difference between tile carrying amount and the
disposal proceeds, net of expenses, be booked as, income or expenditure ofrespective scheme. While disposing of a part of the, Holdings of an individualinvestment, the- carrying amount to be allocated to thatpart is to be determined onthe basis of the average carrying amount of the total Hol~ing of the investments.
10. Disclosure ,The following information should be disclosed in the finanCial statements:
(a)
(b)
(c)
the accounting pollcles for detennination ': of carrying amount ofinvestments,classification of investment be disclosed as Current investments and Lonq-term investments distinctly; , -the amounts included in Income and Expenditure statement for fo!lowing:(i) interest, dividend "and rentals on Investments showing separately
such income from long -term and current investments. Grossincome should be stated, the amount of income tax deducted atsource be included under TDS Receivable~;
(ii} profits and losses on disposal of current illlVestments and changes inthe carrying amount of such investments;',
(iii) profit and losses on disposal of long term, Investments and changesin the carrying amount of such investments; ,-
(iv) the aggregate amount of quoted and unquoted investments, givingthe aggregate market value of quoted inv~stments.
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ADD
ADD
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k V'N»4~ ~ ~ ~'t c"""'~ ~<;:: -l'l\1C~~ ~J "-CALCULATION OF INTEREST ON SECURITIES (2003-04)
fRs. In crores)
CTG STG SDL PSU Grand TotalINTERSET ON SECURITIES MATURING ON ORAFTER01-04-2004 559.29 66.68 324.13 443.09 1393.20
INTEREST ON SECURITIES MATURING UPTO31-3-2004 (upto the date of maturity) 3.74 5.54 8.85 67.92 86.05INTEREST ON REINVESTMENT OF SECURITIES I
- -- - - -- - - - -- - - - -- - - ----
MATURING-UPTO:J1;'~-201r4 ---- ---- 11.67 2.71 2.61 18.76 35.75
REINVESTMENT OF INTEREST PROCEEDS 17.24 2.44 10.49 17.88 48.04
DAMAGES (AS PERBUDGET EmMATES 2003-04) {page 15} - 32.00INTEREST RECEIVABLE ON SECURmES ---> 1595.04INTEREST RECIVABLE ON DEPOSITS IN SDSI(Rs 51837.60 croresl 4147.01INTEREST RECEIVABLE FROM IFCI 35.91LESSINTEREST ON SRF 63.91NET INTEREST RECEIVEABLE 5714.05REINVESTMENT RATES ----------------> CTG 6%
SDL 6.25%STG 6.50%PSU 6.75%
Intere.t PIIyment liability on monthly running belance for, ZgUiS-U4 I•••. ~...... ••••__ •• _ , SURPLUSIDEFICIT i i
·106.18218.11641.40
'- -.-- INTERl:~T CALCULATIPN CONFIDENTIAl. ~
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Il'em No.4: DccIGl'Gtionof rote of InteNstto be.~dit~ to EPF members'account for the year 2003-2004. " I
Contingencies N9'irinq provisioning.
i .~., ;
defaulted in paymentof principal••.,••.,•••"'~." --, The eXposureof the CBT,EPFin"'n~M:HlrDllln.- ,-
,"
Rs. 25crores: PSlDC, Rs. 33 croreS:'
MKVDCRs 21 crores. EPF'IIhasalso, inv.tst~
institution that is reportedly having:"prC)blfim\$
prudent to' have sufficient buffer to maI~"~_K4rlprincipalpayments by anyor all of th~.m~'WNJmJl
'\.}-'
- The' unc/Qim«/ dq»Sit QCCtIUIIW' ~e"U,', ,'", I," "~;
payable to"members if such a claim is .rai~~'~1.<.!?R:)~9!~t:~,interest, ~ymentIic:lPilityon these accounts is not belrg.t~ into ~onsideraijonwhile calaJlating
.-"~- 1 ·~;--~-,ftt~;_:---~-~-'~,/{j.~ . -_.
the interest payment liabiHty.Contingentrese~ ~ould be there .to take care of; .: ~.: ~},~-1tJ:;.~,.., .- i~-':-;:\-
this liability. ,", ~ ,
• Current yields on investments being low,declclrin9t2h~~' ¥es:of interest wUl
affect the financial position of exempt 1'r'US14~fl1eJ~bas!beenraised by
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the employers' associations in their represei1t(lfion. In ;-case these trusts
S&.rrender their.exemption on account of i~i~~~ff.~~r'the liabiliiy will
devolveonCST,EPFas ultimatelythe fiduciary~~tWitY ~s with CBT,EPF.
• The Finance and Investment Committee hQS;'app.,o~"chgpges in accounting"~
of discount/premium on investment transactionsinits;~tt: meeting hetd on
23rd April 2003. The difference between face.';~J~)¥Cost of securities: ~ . '~"r"f~~i'.''''''-.~\
is to be amortized by proportionate reduction¥r9m~in~~ receipts. Sincei;?~rq-:~~~:~~jBt~-~<;;ll;:-·
one time effect will have to be made for previous years'~justments, some!, .oi.. '" I'
r ~.-~:
reserves may have to be earmarked forsC::une.:;
C:\FinInvMet\FmInMetAq\A~\Continqencid.doe· i.- ',"- ,.- .,
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• Government of India may pay the interest accrued ,n SDS after 30h June /
2003 in cash as. no re-investmentJ~P9~.;I?,~Jr ~[)S. Approximately RS.f- • - ~ ,,~,. ...,•.• -''-. - ~••~;:....,:-,.. i
~OO crores will need to be re-in~,~t of 6.4"0. Further,, ,-t
if the Govt of India decides not to' .,,_ ••.•.•" -,
then as per the 50S provisi0f,ls;t:(~.
equal annual installments. Thus"
of the SDS corpus) will be I.~~'
current yields (6.4%) or in ~h lJ.'I~,'.l",,,{;IMM'
current investment yields. Inbot~t~.'~j~~rest income of SDS
will take a substantial hit. tttt~~1~:~1~PS"t ~
• States have been increasinglyresor,tt~'-~,~%.~te~ o~ J:)ehalf of:.~,:' .,~ J~\':~:;~'-t.:,>·,:r:,"- ,'/"'i~-: ."":: ,'. . -;;.
pubic sector entities undertaJqrig!fa~,., " ',." '" ,,;'~49~~ltt cmC;l:' other._ ;~·i:~-~_.-,_:-;.tlF~ . _J~':;'.J. . - ,-.
developmental activities. In' addino]:i; ",/t'.-"\are assured: ,payment• ~:~-~ -~; ,.~-",~ •• '.': ~~:-~: _.:< ••• :,~":- t ~
arrangements, which, even if not baCkedbY'explic.it7~~tees, represent
a direct liability on the, cash flcM'~pJ't~i~St~~~ce, the rising:-,:- ~:-,~?- -:,:';'~:;(:~;l .. ,.:
guarantees and assured payment arrongements at ':the State level pose
is payable 'in five
._.,..,_ t:!rftre.~(it being, 20%
issues of sustainability of State fi~.The.default position in respect-.~ :'-:-' r.~:
of institutions guaranteed by vari~s ~~;tejO~r"~~ts is as follows:-
Guorantor state and'Mault CBs. in grot'!s)
institutions !,~ -', ,~+,
Rs. 1.96 ereresMaha/"Qshtra (MKVDC,
MHMJP)
Orissa (OIDC)
Punjab (PSI DC)
Uttar Pradesh (UPSEB,
UPPICUP)
1~~:/ ..;!
Rso.04 ereres
Rs.O.03 fl"0res
Rs. 3~ores
C:\FinInvMet\FinInMctAq\AQendll\ContinQenc:ies.d~-
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'1lie (ulluwfllY LLll>Il!Is ImJlcalive or lIl1s:Projected Actual Rate of Surplus
YEAR Interest Interest· Interes~ Projected Interest (Col.Earnings Earninas declared (~/o) liabilities 3- Col. 5)
1 2 3 4 5 6.-.
1996-97 '-:i08s:ii; 3351.48 lr,-OO -----_.-3075.72 275.76
1997-98 3675.97 3795.61 12.00 3630.18 165.43
1998-99 4374.74 4368.85 12.00 4304.94 63.91
1999-2000 4992.23 5101.26 12.00 4888.8 212.46
12 (Apr-Jun) .
2000-2001 5117.29 5601.38 11 (Jul-Mar) 5371.53 229.85
xv) Hence the above annual residual interest reserve has formed a
comfortable cushion In the nature Of a risk reserve. On account
of the method of accounting surpluses are not transferred to a
separate reserve fu.n~ and remain available within the interest .
suspense account, which on 31.03.2001 stood at Rs.8022.22
crores.
xvi) The interest suspense account has also other non distributable
~ moneys such as damages levied under Section 14B on defaulting
establishments as also interests accruing on past accumulations
of residual surpluses lying in intereSt suspense account.
7. The Ministry of Finance vide D.O. letter No. F.5(6)/PD/2002 dated 13th
June 2002 has. communicated its inability to support the proposal for interest
rate of @ 9.5% on EPF accumulations. It has 'advised that interest rate onI
. EPF accumulation be fixed @ S% for the financial year 2002-03. The
grounds 011 which the Mini!jtJy of Finance have based their dcdslon are:
i) The prudent asset liabilities management demands provisions for
adequate surplus for protection against contingent tiabillties. On
a corpus of about Rs.60000 crores and projected interest liability
of r~s.5600 crores, projected surplus of RS.147 crores is not
sufficient. The Employees' Provident Fund Organisation has not
created any risk capital reserve to saFeguard against investments.turning out to be poor.
~- rr> .--.., ",....., "......" .-.. ,-. - "'""'""'"""'"-- ""'"-, ""'"'\ '\ '\ .....1 '\ -, ») ")'-") ") ') i
INTEREST PAYMENT LIABILITY OF CBT, EPF for the year 2003-04(PROJECTED RANGE)
,
LIABILITY INCOME SURPLUS/DEFICIT
@ g% 5819.23 5714.05 -105.18-----
@ 8.5% 5495.94 5714.05 218.11_ ... _.-
@ 80/0 I 5172.65 5714.05 541.40---------_-=-.c.--." _~ __l~.~,~~__ -- - --- _._-
. - .-. -.- . --- -
-
(Rs. in Crores)II
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.Item no. 2 (10): Study for identifying f!lew avenues forinvestments and investment guidelines
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The Finance and Investment Committee in its 71st meeti'ng held on 23rd April
2003 considered the issue of having a comprehensive examination of the new
avenues for investment, investment guidelines, monit<>ring:of investment
activity & valuation of investment portfolio for identifying: -
)> Avenues for short term parking of funds.> New investment avenues, other than those provided in the extant
pattern keeping in mind the risk/return profile of each of such newavenues.
> Analysis of portfolio composition and duration of various Provident/Pension Funds within India and abroad.
> Guidelines for valuation of investment portfolio.
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The Committee decided as under
"Regarding study for identifying new avenues for investment, investment
guidelines etc., an agency of Internationotrepute such as Price Water
House Coopers etc., may be engaged on competitive bQsis. In the terms
of reference, the consultants be advised to give their recommendations
regarding own setup of EPFO for investing its fund~. ' Suggestions given
by the Bombay Chamber Of Commerce d Industry for issuance of special
bonds by the Government and of multilaterol bonds by ADB/World Bank
etc. for PF investments may also be considered by the consultants. "
Accordingly draft terms for reference and eligibility requirements
have been prepared and are placed as Annexure to this item for
consideration of the Committee.
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ANNE~URE to item 2(10)
BROAD TERMS OF REFERENCE FOR STUDY REGARDINGINVESTMENT MANAGEMENT
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~ To suggest methods for optimizing the investment performance within
the given pattern of investment.
~ To suggest methods for optimizing the investment performance by
making minor modifications in the given pattern ofinvestment.
~ To identify emerging trends in investment management of retiral funds;
identify road map for next ten year in relation to fund management
including radical change in pattern, risk - return trade offs and
governance structures for same.
~ To identify exposure norms for each category of investment instruments.
~ To identify all relevant risks and probable approaches for measuring
monitoring and addressing each of them.
~ To identify national and international best practices in specific areas and
establishment of benchmarks for Employees' Provident Fund in areas of
current and future investment patterns, operations, management and
governance structure.
~ Suggest criteria and procedure for populating the Finance & Investment
Committee.
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~ Suggest modclities for evaluating the investment', portfolio, especially in
view of ' held till maturity' nature of investments.
~ Suggest reporting standards, structures and periodicity of information
dissemination.
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. ,ELIGIBLE CONSULTANCY ORGANISATIONS
Consultancy organizations of repute having proven track record and
experience in carrying out such studies for retiral funds .in India and/or,abroad with a minimum balance sheet size of Rs 100 crores o~ its equivalent.
The assignment is open to both Indian and International consultants who
have full-fledged operations in India. Consultants who wish to be short-
listed for the assignment may send in profile statement giving their estimate
for consultancy charges, information about their experience iri\handling such
projects, technical capabilities, client references, financial I, strength and
global operations along with profile of personnel to be deployed, domain
Knowledge and actual time frame proposed for completion of the task.
The Employees' Provident Fund Organisation shall have full proprietary
rights including copyright over the study output and the consultants, so
appointed shall not be able to use the output in any form except with
express written permission of the Chief Executive, Employees' Provident
Fund Organisation.
