ESIC Seeks SEBI Nod to Invest Surplus Funds in Stock Market
The Employees’ State Insurance Corporation (ESIC) is looking to invest surplus funds in the stock market through exchange traded funds (ETFs) and is currently awaiting approval from the Securities and Exchange Board of India (SEBI) for an exemption from the ₹25 crore per transaction limit.
According to sources in the Ministry of Labour and Employment (MoL&E), as of March 31, 2024, the ESIC had investments in various government and other securities, bonds, debentures, fixed deposits, and a Special Deposit Account totaling ₹1,48,547.16 crore.
Of this amount, ₹79,611 crore was invested in government securities, ₹7,147 crore in other approved securities, ₹39,407 crore in debentures and bonds, more than ₹44 crore in fixed deposits with scheduled commercial banks, and ₹22,336 crore in a Special Deposit Account with the Union Ministry of Finance.
The ESIC had written to SEBI last year requesting an exemption from the ₹25 crore per transaction threshold, citing its inability to make such large investments in one go. However, the response from SEBI is still pending.
The decision to invest surplus funds in equities through ETFs was made in the 189th meeting of ESIC held in December 2022, with the aim of diversifying investments and generating higher returns than traditional debt instruments.
Once SEBI approval is obtained, ESIC plans to engage fund managers from asset management companies to invest a portion of the surplus funds in the stock market through ETFs. The long-term returns from these investments would be used for the welfare of registered employees.
While the exact percentage of surplus funds to be traded is yet to be finalized, the plan is to start with 5% and potentially increase it to 15% in the future, following Union Ministry of Finance guidelines on pension fund investments.
ESIC officials noted that equities typically offer higher returns compared to fixed income securities, with an average return of 10-12% over a five-year period. The role of ESIC will be limited to monitoring, with the actual investments being handled by the fund managers of asset management companies.
Published on March 6, 2025.
