Date:14/12/2005 URL: http://www.thehindubusinessline.com/2005/12/14/stories/2005121401311002.htm

Back EPF rate

This has reference to the report, "PM to look into EPF interest rate issue," (Business Line, December 10).

There are four main reasons why the Employees Provident Fund Organisation (EPFO) is not able to cope up with the uniform rate of interest:

The age-old system of record maintenance in the form of ledgers/files reduces the speed of dues assessment, calculation and recovery of simple interest/special damage amount on the belated Provident Fund and allied dues remitted by the employer.

Hence, the EPFO should first replace the existing manual record by keeping floppies and CD writers for prompt, speedy assessment/recovery of dues and also ensure there is no paucity of staffs/recovery officers.

The EPFO which has more than four crore subscribers should open an EPF Bank with at least one branch every 25 km, so that employers can deposit the Provident Fund and allied dues directly to the bank.

The EPFO would not have to pay separate inspection charges to other banks for maintaining its funds and the amount may be diverted and paid as EPF interest to its subscribers.

Opening one EPF Bank branch every 25 km will attract more voluntary coverage, avoid return/rejection of member claims as there will be scope for clarification of rules by the EPF Bank. The EPFO thus could save crores of rupees just by avoiding return/rejection of member claims.

Employees/family members after settling their EPF, EPS and EDLI amount from the EPFO should be able to re-credit their amount in the EPF Bank.

The amount then will get recycled in the same organisation. The EPFO can grant a separate rate of interest for the amount re-credited in the EPF Bank by former members which can higher than that offered by commercial banks but less than or equal to the rate given by the EPFO to its live members.

Employers are given 15 days and a grace period of five days, that is, up to the 20th of every month to remit their Provident Fund and allied dues of the previous month without any simple interest and special damage amount.

But the EPFO gives full month interest and subsequent compound interest for the ensuing month. This system means a great loss to the EPFO, and should be tightened.

If all these suggestions are implemented, there need be no fluctuation in the EPF interest every year.

V. Sundaralingam

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