There are conflicting views on whether the issue of withdrawing provident fund deposits from special deposit scheme (SDS) would be taken up at the Central Board of Trustees of the Employees Provident Fund Organisation (EPFO) tomorrow. This follows an appeal from Finance Minister P Chidambaram to Union ministries that in view of the ongoing economic crisis they should not ask for competitive interest rates for their bulk deposits.
The EPFO said today that the matter is not there on the agenda for tomorrow while sources in the labour ministry said it may take a view on the matter depending on a response from the finance ministry on its request to hike interest rates.
The labour ministry had written to its finance counterpart that deposits elsewhere were fetching much better returns than those with the SDS, which gave 8 per cent interest. It had demanded that interest rates be increased hinting that it would like to withdraw the deposits of Rs 53,000 crore out of a total corpus of 2,40,000 crore and invest them elsewhere.
Sources in the ministry say that the finance ministry is yet to respond to this communication and hence are expecting to hear from the ministry tomorrow at the trustees’ board.
“We would then take a view,” a senior official said. It has been the ministry’s case that the SDS deposits are getting much less returns than the money invested elsewhere which was fetching more than 10 per cent.
Another member, WR Varadarajan, national secretary of CITU, said that the CBT cannot take up the matter as the finance and investment committee of the board is yet to take a call on the matter. In any case, he said, deposits should not be withdrawn.
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Ministry sources say that Chidambaram’s recent appeal rules out hike in interest rates for SDS. In that case, the EPFO, which comes under the labour ministry, would be either forced to keep the deposits in SDS or take it out even if it meant that the money is given as dated securities. The ministry is under pressure to take a decision on the deposits as it has a contract with fund managers hired by it to manage the EPFO funds. Four private fund managers apart from State Bank of India are now handling investments.
Money is unlikely to be handed over in cash given the current situation, sources said.
The finance ministry had stopped taking fresh deposits of EPF in SDS after 1998-99. Non-SDS funds are now deposited in central government securities and mutual funds and bonds of public sector banks and public financial institutions and state government securities.
Some money also goes to Collaterised Banking and Lending Obligations, or CBLO, in which deposits are made for very short periods of five to 15 days.