Date:05/07/2009 URL: http://www.thehindu.com/2009/07/05/stories/2009070555350900.htm

National

EPFO recommends 8.5 per cent interest rate

K. Balchand

NEW DELHI: The Employees Provident Fund Organisation (EPFO) on Saturday recommended an 8.5 per cent interest rate for 2009-10 to benefit about 4.5 crore provident fund subscribers, ahead of the presentation of the General Budget in the Lok Sabha on Monday.

The decision to retain the 8.5 per cent interest rate for the fifth successive year was taken at the EPFO’s policy making body, the Central Board of Trustees (CBT), and will be sent to the Finance Ministry for ratification.

Chaired by the Union Minister for Labour and Employment, Mallikarjun Kharge, the CBT was against raising the interest rate as it would have resulted in a deficit in the EPFO’s account.

Representatives of employees demanded a higher interest rate and voiced their dissent against the decision, which is expected to leave a surplus of Rs. 6 crore with the EPFO, where provident contributions stand at Rs.1.82 crore. The EPFO had suffered a deficit of Rs. 139 crore in paying an interest rate of 8.5 per cent on deposits in 2008-09, and was left with no reserves to accommodate a higher rate of interest.

The organisation, however, deferred a decision on investing 15 per cent of its corpus in the equity stock market.

The Finance Ministry had in August suggested an investment of 15 per cent, which would have seen a flow of about Rs. 25,000 crore into capital markets.

Mr. Kharge said a decision on this matter would be taken at the next meeting of the CBT, stressing that safety and security were factors that had to be considered as much as returns to employees.