The decision to stop giving interest on deposits in inoperative accounts with EPFO would improve returns for three crore operational accounts by 0.25 per cent next fiscal, according to a study by the retirement fund manager.
The trustees of the Employees Provident Fund Organisation (EPFO) on September 15 decided to stop crediting interest in these inoperative accounts with effect from April 1, 2011.
Inoperative accounts are those accounts in which no provident fund contribution is received for a period of the 36 months or more. At present, over Rs 15,000 crore of the unclaimed money is lying in more than 3 crore inoperative accounts.
The latest estimates by EPFO say that about Rs 5,000 crore left in such accounts in 2011-12 would earn over Rs 400 crore which would help improve the rate of return on deposits by other live subscribers by 0.25 per cent.
"The rational expectations indicate that about Rs 5,000 crore would remain with EPFO in inoperative accounts next fiscal which would help us crediting over Rs 400 crore or 0.25 per cent extra return in live accounts," Central Provident Fund Commissioner Samirendra Chatterjee told PTI.
EPFO has estimated that about Rs 10,000 crore would taken out of these inoperative account holders out of the total Rs 15,000 crore money lying in such accounts.
About 24 lakh inoperative accounts holders, which form just 8 per cent of total 3 crore such subscribers, account for Rs 10,000 crore lying in such accounts.
8 per cent of account holders are those who have intentionally continued to keep their money in their accounts for years together after they have retired or left jobs, the EPFO analysis said.
They did so because there is no other investment option which gives them 100 per cent capital security and return of over 8.5 per cent in the country, it added.
Chatterjee said, "It is also expected that these Rs 10,000 crore withdrawn from the inoperative accounts will find their way with safe avenues like fixed deposits."
Asked about the next year's rate of return for EPFO subscribers, he said, "It is too premature to say now, but it is true that the live account holders would get the benefits of income on frozen inoperative accounts next fiscal onward."
