Government-owned lender State Bank of India has given a return of 9.7 per cent on provident fund deposits, which is over half a percentage more than the best among the private sector asset managers during the quarter ended December 2008.
The other three private fund mangers, including HSBC AMC, ICICI Pru AMC and Reliance AMC, gave a yield of 8.5, nine and 9.1 per cent, respectively, during September 17 to December 31 in 2008, an Employees' Provident Fund Organisation (EPFO) source said.
The EPFO, manging about 4.4 crore provident fund depositors, allowed the three private fund managers to manage its incremental deposits of about Rs 25,000 crore per annum in July last year. The main objective of this exercise was to see an improvement in returns on EPFO's investments.
In the present scenario, EPFO's return on investments, specially in central and state government securities and special deposit schemes, are not enough to pay the depositors an interest rate of over nine per cent.
The special deposit scheme is churning out a meagre 7.5 per cent return on about Rs 52,308 crore of investment by the EPFO. However, the investment of Rs 34,537 crore in public sector undertakings or financial institutions is earning more than nine per cent.
During 2008-09, the EPFO incurred a Rs 139-crore loss on the payment of 8.5 per cent interest on deposits to subscribers. These losses were made up from contingency funds.
If the EPFO makes an interest payment of 8.75 per cent for the fiscal 2009-10, it could result in losses of around Rs 366.77 crore at an estimated income of Rs 12,694.23 crore during this financial year.
In this fiscal, the EPFO can easily maintain payment of 8.5 per cent interest on deposits with a surplus of Rs six crore.
The EPFO is managing a corpus of around Rs 1.82 crore with incremental deposits of around Rs 25,000 crore every year. It covers more than 500,000 employers.
The EPFO has invested Rs 30,461 crore in central government securities, which earns a return of 7.25 per cent, and Rs 20,000 crore in state government securities and loans, which fetches 7.5 per cent return.
