India EPFO considers allocating up to three percent annual funds to startups

The Employees Provident Fund Organisation is preparing investment guidelines to deploy up to 3% of its annual accretions into Category I and Category II alternative investment funds. The Observer Voice and Free Press Journal both report that the retirement savings body discussed the proposed allocation during an investment committee meeting on October 22, 2026. [1][3]

According to the Observer Voice, the move comes five years after the Indian government initially permitted such investments. The Department for Promotion of Industry and Internal Trade recently contacted the pension manager to encourage participation in its newly launched Startup India Fund of Funds 2.0. All candidate alternative investment funds must be regulated by the Securities and Exchange Board of India. [1]

The Employees Provident Fund Organisation operates under India's Ministry of Labour and Employment, where it manages mandatory provident funds and retirement schemes for Indian workers. Alternative investment funds represent non-traditional asset classes separate from standard public stocks, bonds, and cash holdings. [4][5]

The inclusion of sovereign pension capital into domestic venture funds provides critical liquidity for early-stage and growth-stage technology businesses seeking scalable business models. Capital allocations from institutional domestic managers help reduce reliance on foreign limited partner commitments across the Indian startup ecosystem. [1][6]