The Hindu : EPF rate cut imminent

Online edition of India's National Newspaper
Wednesday, Apr 03, 2002

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National

EPF rate cut imminent

By Our Special Correspondent

NEW DELHI APRIL 2. With the Central Government lowering the interest rate on General Provident Fund (GPF) for its employees and the Special Deposits Scheme (SDS) from 9.5 per cent to nine per cent, the decks have been cleared for a similar interest rate reduction on Employees Provident Fund (EPF) as well.

Though the Central Board of Trustees of the EPF had on January 22 this year recommended 9.5 per cent interest on EPF for 2002-03, it has now been decided that the trustees would meet again on April 12 to review the decision. In all probability, the rate would be lowered to nine per cent.

While recommending 9.5 per cent interest, the Board of Trustee had taken into account the fact the expected interest earnings of the EPF corpus would be Rs. 5,978.50 crores during 2002-03, whereas the expected interest outgo to the subscribers would be Rs. 5,630.69 crores, thereby leaving a surplus of Rs. 347.90 crores. However, with a reduction of 0.5 per cent in the SDS, the total interest receivable in the provident fund would be lower by Rs 238.42 crores.

The corpus of the EPF was Rs. 59,938.63 crores as on December 31, 2001. Of this, 79.55 per cent is invested in SDS, 8.18 per cent in the public sector and financial institutions, 7.06 per cent in Central Government loans, 3.95 per cent in State Government loans and 1.26 per cent in Government guaranteed loans.

Therefore, the cut in the interest rate on SDS is expected to lead to a lower interest income and, consequently, lower interest outgo on EPF deposits.

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