EPF interest rate decision deferred to July 13

The Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) yesterday deferred to July 13 a decision on the rate of interest payable to depositors for 2004-05.

The board also acknowledged it had not credited any interest to the accounts of the existing depositors since April 2003.

This is because the applicable 9.5 per cent rate had not been officially endorsed by the finance ministry through any notification so far. Hence, the EPFO has also not been able to finalise its annual accounts for the year.

Labour Minister Sis Ram Ola told reporters the board had asked the finance ministry to issue a notification to rectify the situation.

He however said the higher rate of interest had been paid to depositors who had retired or resigned their membership of the Fund, as per the decision of the CBT taken last year.

Ola said he was not aware why former Labour Minister Sahib singh Verma had in such circumstances, announced, that the 9.5 per cent would be payable on all employees' contribution. The minister also made a pitch for not hiking the rate of interest from the present 9.5 per cent.

He said 84 per cent of the contributors to the fund were those whose average balance was just above Rs 3,000. Ola said a hike in the rates would benefit them only marginally. He said this category accounted for only Rs 7,934 crore of the total Rs 1,28,036 crore corpus of the fund.

The minister said he told the trade unions that any hike in the rate would therefore benefit only the richer sections, which were parking their surplus cash with the Fund, at the expense of the government.

At today's meeting, the trade unions pressed for raising the rate of interest to 12 per cent, while the government and employer representatives asked for maintaining the existing rate or even lowering it.

It is learn that finance ministry officials told the meeting that no interest should be paid, before making a deduction of 5 per cent towards the Special Reserve Fund of the EPFO. As on March 31, 2003 , this Fund had 7,987 crore, out of the total corpus of about Rs 1,15 crore in the EPF corpus.

The minister also said even for 2002-03 the finance ministry had not issued any notifications to regularise the rate of interest on deposits.

EPF sources said they had prepared the final accounts for the year, despite such a lack of communication from the ministry, which " was open to question", they acknoweldged. But the fund had decided not to repeat the same in 2003-04.

The finance ministry has been consistently refusing to toe the high interest rates being paid by the EPFO when it has been pitching for a lower rate for other savings instruments.