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Interest and trust

Interest and trust
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First Published: Mon, Feb 23 2009. 12 06 AM IST
Updated: Mon, Feb 23 2009. 12 06 AM IST
On the face of it, there is not much difference between a temple money pot and money in the Employees Provident Fund (EPF). Only the size of the EPF corpus is bigger: a huge Rs33,000 crore.
That, however, poses big problems for the government. On Sunday, six trade unions cutting across political divisions, protested the government’s decision to keep the rate of interest on EPF at 8.5%. The unions want the interest rate to be set at 9.5%.
In an environment where there is constant pressure on the banking system to effect downward changes on interest rates and with a bombed out equities market, the question is, where are the instruments that can yield the government a 9.5% return?
There is no doubt that EPF money needs to be shielded from the financial market storms as it is perhaps the only form of financial security for many employees. But the question about government’s ability to generate high returns without affecting its finances has been evaded for far too long. The unions should realize that riskless investment and high returns are only possible in dreams.
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First Published: Mon, Feb 23 2009. 12 06 AM IST