EPFO board clears 8.5% interest for FY07

Bowing to pressure from Left-backed trade unions, the central board of trustees of Employees Provident Fund Organisation (EPFO) today agreed to pay 8.5% interest to its nearly four crore subscribers for fiscal 2006-07.

"Amid protest by some trade union representatives, it has been decided to pay 8.5% interest on provident fund," Labour Minister Oscar Fernandes told reporters after a three-hour meeting of the trustees.

The decision to retain 8.5% interest will put a burden of Rs 450 crore on the EPFO but sources said the deficit could be offset from a surplus of Rs 590 crore lying in the Interest Suspense Account, Contingency Reserve and Special Reserve Fund.

The board will submit its recommendations to the finance ministry, which is expected to notify the rate shortly.

Fernandes said EPFO had constituted a sub-committee to assess the board's finances. The report of the committee placed before the meeting for deliberation found that there would be a surplus of Rs 595 crore with the board.

Even after paying 8.5% interest, the fund would be having a surplus of Rs 83 crore. The EPFO has a corpus of Rs 94,000 crore including pension fund.