The Department of Economic Affairs has issued a notification under the Securities Contracts (Regulation) Rules Act 1957, permitting the Employees' Provident Fund Organisation (EPFO) to become a member of a recognised stock exchange, according to a release.
Market regulator Sebi had suggested that the government facilitate the flow of EPFO funds to equity-linked mutual funds to boost the market.
The main recognised exchanges in the country are the National Stock Exchange of India and the BSE.
The Finance Ministry has been pitching for EPFO funds to be invested in the equity markets to maximise their yields.
However, following strong opposition from unions in view of the volatile nature of stocks, the EPFO did not opt for equity investment.
The Finance Ministry had allowed the EPFO to invest up to 5 per cent of its funds in equity in 2005 and enhanced the limit to 15 per cent in 2008.
A recent notification by the Labour Ministry allows the EPFO to invest up to 5 per cent of its funds in money market instruments, including units of mutual funds and equity-linked schemes regulated by the Securities and Exchange Board of India.
The EPFO has more than 5 crore subscribers across the country. It provided interest of 8.5 per cent on PF deposits in 2012-13. The EPFO trustees have decided to pay interest of 8.75 per cent in this financial year.