There is some good news in the budget for the 24.5 million private sector employees. The interest rate on the Employees Provident Fund is not going to come down from the 9.5 per cent at present.
The board of trustees for the Employees Provident Fund, which decides the rate of interest on deposits in the fund, is expected to ratify its interim decision, made in January, to stick to 9.5 per cent. Sources said while the date for the board meeting had not been finalised, it would definitely be held in March.
This has become possible because the finance minister has not slashed interest rates on special deposit schemes along with other small savings schemes, unlike last year. Under current rules, the Employees Provident Fund invests nearly 80 per cent of its income in the special deposit schemes. As a result, any change in the rates of interest on special deposit schemes becomes the determining rate for the interest rate on Employees Provident Fund.
The Employees Provident Fund corpus is made up of a 10 per cent salary contribution by private sector employees along with a matching contribution by their employers. The Employees Provident Fund is the largest pension fund in the country with contribution from members aggregating over Rs 96,260 crore on March 31, 2000.
Under the present set-up, the board of trustees of the Employees Provident Fund recommends the operative rate of interest on the deposits in the fund at the beginning of the fiscal.
The recommendations are forwarded to the ministry of labour, which in turn intimates the finance ministry.
An endorsement by the finance ministry of the rate becomes the relevant rate for the fund.
While the finance ministry can overrule the recommendations of the board, the Employees Provident Fund is expected to be able to stick to its guns this time unlike last year. Sources said even the present 9.5 per cent rate of interest is not acceptable to the board, which might pitch for higher. However, such a possibility is ruled out by the finance ministry.
