EPFO Reportedly Plans to Put Up to 3% of New Inflows Into Startup-Focused AIFs: What Founders Should Know
Several outlets report that EPFO is drafting guidelines to invest up to 3% of its fresh annual accretions in Category I and Category II AIFs, with a board meeting expected in November. It is a proposal, and startups cannot apply to EPFO directly.
Several business outlets report that the Employees’ Provident Fund Organisation (EPFO) is working on guidelines to invest in alternative investment funds (AIFs), including funds that back startups. The reports, which trace back to a Times of India story, say the idea is to put up to 3% of EPFO’s fresh annual accretions into Category I and Category II AIFs.
This is a reported plan, not a decision. Business Standard notes that the investment rules are still being worked out and the proposal has yet to receive final approval. We have not found a statement from EPFO or the labour ministry confirming it, so treat everything below as what the media is reporting.
What the reports say
The Economic Times, Business Standard, Livemint and the Free Press Journal all describe the same plan:
- EPFO is considering allocating up to 3% of its fresh annual accretions to Category I and Category II AIFs.
- A proposal was discussed at an investment committee meeting held the Thursday before the reports appeared.
- It is expected to go before EPFO’s Central Board of Trustees, headed by Labour Minister Mansukh Mandaviya, in November.
- The move follows a September letter from the Department for Promotion of Industry and Internal Trade (DPIIT) asking EPFO to take part in the recently launched Startup India Fund of Funds 2.0.
- The reports say the government cleared EPFO’s entry into these asset classes five years ago, but EPFO has not yet invested in SEBI-regulated Category I and Category II AIFs.
Livemint explains that “fresh accretions” means additional funds received during a financial period. So the 3% would apply to new inflows, not to the whole corpus. EPFO manages around ₹30 lakh crore in retirement savings for nearly 30 crore members, according to the report.
Startups cannot apply to EPFO
This is the point founders most need to get right. Livemint reports that EPFO is considering routing money through institutional platforms such as the National Investment and Infrastructure Fund (NIIF) and the Small Industries Development Bank of India (SIDBI), rather than investing directly in individual startups. The Economic Times and Business Standard likewise say the initial routes under consideration are NIIF and SIDBI’s Startup India Fund of Funds 2.0.
In practice, any EPFO money would reach a startup only after passing through an AIF. No application route for founders has been announced, and none is described in the reports.
Category I AIFs typically support startups, small businesses, infrastructure and venture capital. Category II funds include private equity, real estate and private debt funds. So the startup-relevant part of this plan is mostly the Category I side.
Where Startup India Fund of Funds 2.0 fits
The government notified Startup India Fund of Funds 2.0 in April 2026 with a corpus of ₹10,000 crore. According to the Press Information Bureau release, it commits capital to eligible SEBI-registered AIFs, which in turn invest in entities recognised as startups by the Central Government. Its priority areas include deep tech startups, early growth stage startups supported by smaller AIFs, technology-driven and innovative manufacturing startups, and sector or stage agnostic startups. SIDBI is the initial implementing agency, and DPIIT is to issue the operational guidelines.
That release, as we read it, does not mention EPFO. The link between the two comes from the media reports about the DPIIT letter, not from the scheme announcement itself.
Safeguards reportedly under discussion
The reports say the proposed framework is expected to include:
- A minimum corpus of ₹100 crore for eligible AIFs.
- Limits on exposure to individual funds.
- Restrictions on investments in foreign-incorporated entities. The Free Press Journal describes this as a ban on investing in overseas-incorporated entities.
- Requirements for fund manager independence.
Two different 5% limits
It is easy to mix up the numbers, so here they are separately.
- The finance ministry’s existing investment pattern, as reported by the Economic Times, Business Standard, Livemint and the Free Press Journal, lets EPFO invest up to 5% of fresh accretions in asset-backed and trust-structured investments. Livemint describes the proposed 3% for Category I and Category II AIFs as a separate consideration within that broader framework.
- Separately, AffairsCloud reports that in 2021 the Labour Ministry notified a change to EPFO’s investment pattern allowing it to invest up to 5% of its investible surplus in AIFs, with conditions such as SEBI-regulated Category I and II AIFs and a corpus of at least ₹100 crore. That is background on the original approval, not new news.
The reports do not explain how these limits relate to the 3% idea, so we have not tried to.
What has not been announced
- A rupee amount. The reports give a percentage of fresh accretions, not a figure in rupees.
- Which AIFs. No fund has been named, beyond the NIIF and SIDBI routes being considered.
- A timeline. The board meeting expected in November may take up the proposal, but no outcome and no start date have been reported.
- Final guidelines. Livemint says that until the board considers the proposal and the guidelines are finalised, the allocation should not be treated as an approved investment decision.
- Any application process for startups or funds.
Livemint also says members should not assume that the proposal changes their provident fund contributions, withdrawal rules or retirement benefits.
What this means for you
- Do not wait for it. Nothing is approved, and there is no amount or date. Keep your current fundraising plan.
- Do not look for an EPFO application. If this goes ahead, the capital would come through AIFs. The funds to watch are the venture funds you would approach anyway.
- Check which funds back startups like yours. If you are raising from an AIF, ask whether it is registered with SEBI and whether it is, or plans to be, supported under Startup India Fund of Funds 2.0.
- Make sure your startup recognition is in order. The Fund of Funds 2.0 release refers to entities recognised as startups by the Central Government, so keep your records current.
- Watch the November board meeting. Check for an official decision or published guidelines after it.
Sources: The Economic Times, Business Standard, Livemint and the Free Press Journal (reporting a Times of India story); the Press Information Bureau release on Startup India Fund of Funds 2.0; AffairsCloud on the earlier approval.
