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The Employees Provident Fund Organisation (EPFO) decided on Tuesday to retain a 8.75 per cent interest rate on the deposits for its 50 million -plus subscribers in 2014-15.
The decision was taken at a meeting of its Central Board of Trustees (CBT), chaired by Union labour minister Narendra Singh Tomar.
It had provided a 8.75 per cent rate of interest for 2013-14 as well, higher than the 8.5 per cent declared the previous year.
Tomar had initially suggested lowering the interest rate to 8.7 per cent, on the recommendation of EPFO’s finance, investment and audit committee. Pressure from central trade union (TU) representatives made the retirement fund body maintain the status quo.
According to its calculations, interest rates could have been raised to 8.8 per cent but this estimate didn’t account for the recent increase in the minimum wage ceiling from Rs 6,500 to Rs 15,000 a month.
EPFO’s investment wing said if the minimum wage ceiling was factored in, there would be an overpayment of interest as compared to receipts during the year. Consequently, the wing suggested lowering the interest rate to 8.7 per cent or to defer a decision till the last quarter of the financial year.
An internal document stated if EPFO had increased the interest rate to 8.8 per cent, the surplus available would come to about Rs 77 crore. At 8.7 per cent and 8.75 per cent, the surplus would be Rs 407 crore and Rs 242 crore, respectively.
Earlier, some TUs had asked for a rise in the interest rate to nine per cent. EPFO calculations showed this would mean a deficit of Rs 583 crore.
CBT also rejected suggestions from the finance ministry on investing a portion of its funds in the equity market. The revised investment pattern suggested by the ministry included investing up to 15 per cent in direct equity and up to 15 per cent in index funds.
However, EPFO decided to remove the cap for investment in government securities from the present 55 per cent. It also approved a facility for online contribution of EPF funds. “This would help us save Rs 100 crore,” said Tomar.
Two sub-committees have been constituted for the coverage of contract workers and construction workers.
Apart from Tomar, minister of state for labour Vishnu Deo Sai, labour secretary Gauri Kumar, Central PF commissioner K K Jalan, employees’ representatives and employers’ representatives are part of the CBT.
EPFO DECIDES
- Interest rate on PF deposits kept unchanged at 8.75%
- No investment in equities and exchange traded funds; removes cap on government securities
- Constitutes a sub-committee for construction and contract workers to improve their coverage
- Decides to go for short term borrowing of funds for participation in primary auction of securities
