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EPF invested large amounts of money to repurchase TBs from secondary market
View(s):Despite its ability to purchase Treasury Bonds (TB) from the primary market at a higher rate of interest, the Employees Provident Fund (EPF) had continued to invest a large amount of its monies to re-purchase TBs in the secondary market from a private entity (which is now under probe), according to the Auditor General’s (AG) Report, included in the EPF”s Annual Report for 2016, tabled in Parliament this week.
The repurchases had been made in 2016, almost a year after the role of the primary dealer in question had come under investigation by a Parliamentary committee as well as other committees. The EPF had thus deprived its members of getting more benefits, which, instead, were given to a private entity, which had been questioned by a special Presidential Commission, the AG said.
On March 29, 2016, the Central Bank had issued TBs to the value of Rs 40,000 million, but the EPF had bid low for purchase in the primary market. “Despite it being been able to purchase TBs under a high effective rate of interest at the primary auction, the EPF had invested less in the purchase of these TBs and instead, invested Rs 9,903 million in repurchases under the low interest rates of 6.5% to 8%. These transactions have been carried out by the EPF through 5 primary dealers, of which the highest percentage of 61% had been repurchased through a private entity under contention,” the Report stated.
The AG’s report also said that primary market investments in TBs, which is treated as a main investment source of the EPF and less risky, had in 2016, abnormally decreased by 50%, as compared with 2015. As such, the total investment in TBs, amounting to Rs 318 billion in 2015 had declined to Rs 183 billion or, by 42%, by end 2016.
Of these repurchase investments, a considerable percentage (between 61% and 94%) had been used for re-purchase from the private entity under probe. The AG ‘s report also noted that the EPF had joined an investment proposal for a hotel complex to be constructed at a cost of Rs 12 billion, in collaboration with two other government institutions, with a sum of Rs 5 billion disbursed by end 2013.
According to the agreement the Shareholders signed on June 4, 2013, it was decided that the Shares of the company would be quoted in the Stock Market, prior to the end of 2015, but it had not been completed even by the end of June 2017, as construction work has been delayed.
The Report also noted that the interest per cent paid to EPF members in 2016 and prior years decreased gradually (from 2009 to 2013), from 13.75% to 10.5%, and remained unchanged at 10.5% in the past two years.