The proposal, if it goes through, will fetch higher returns to 4.5 crore EPFO subscribers in the current declining interest rate regime where returns on provident fund accumulations are bound to see a downward trend, much in sync with other small saving schemes. Currently, 15% of PF contribution is invested by EPFO in exchange-traded funds and 85% in debt instruments like government securities.

This would require significant alteration in the investment pattern of EPFO notified by the finance ministry from time to time, a senior government official told on condition of anonymity, as the proposal is still at an initial stage. "Giving subscribers the choice of investment for their provident fund money will make the EPFO scheme more lucrative," the official added.

The finance ministry had in 2015 directed EPFO to invest 5-15% of its incremental income into equities. Following this, in the first year itself, EPFO invested 5% in ETFs and this was raised to 10% and 15% in the subsequent years. The cumulative return on EPFO's investment in equity was 13.72% until May in the two years since it began putting money in ETFs. EPFO declared an interest pay out of 8.75% in 2014-15, 8.8% in 2015-16 and 8.65% 2016-17.

EPFO has been raising the amount it invests in equities since 2015, when it started with 5% of the corpus. Its investment in 2015-16 was `6,577 crore, rising to `14,982 crore or 10% of its incremental corpus in the following year.

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