New Delhi: Bowing to pressure from Left-backed trade unions, the Employees Provident Fund Board on 23 July agreed to continue paying 8.5% interest rate to its nearly 4 crore subscribers for fiscal 2006-07 as well.
“Amid protest by some trade union representatives, it has been decided to pay 8.5% interest rate on provident fund,” Labour Minister Oscar Fernandes told reporters after a three-hour meeting of the EPF Central Board of Trustees.
The decision to retain 8.5% interest will put a burden of Rs450 crore on the EPF fund but sources said that the deficit could be offset from a surplus of Rs590 crore lying in the Interest Suspense Account, Contingency Reserve and Special Reserve Fund.
The Board will submit its recommendations to the Finance Ministry, which is expected to notify the rate shortly.
Fernandes said the EPF had constituted a sub-committee to assess the Board’s finances. The report of the committee placed before the meeting for deliberation found that there would be a surplus of Rs595 crore with the board.
Even after paying 8.5% interest rate, the fund would be having a surplus of Rs83 crore.
The EPF has a corpus of Rs 94,000 crore including pension fund.
The total interest outgo for 2006-07 will be to the tune of Rs7,800 crore, Fernandes said, adding that the decision pertaining to interest payment for the current fiscal will be decided later.
Referring to the demand of trade unions to pay higher interest rate, he said the board had fixed interest rate only for the previous year. Since the bank rates have gone up mainly this year, the board can consider revising interest rate for 2007-08 later, he said.
Fernandes said the board also discussed the government’s suggestion to invest 5% of the corpus in the stock market but no decision was taken.
However, representatives of the Left-affiliated trade unions rejected the decision of the board, while demanding at least 9.5% interest rate.
“At a time when banks are paying even up to 10.5% interest rate a year, government should come forward to support the board to pay 9.5% interest rate by raising administrative rate of interest on Special Deposit Scheme (SDS),” said Sankar Sen, general secretary, United Trade Union Centre, Lenin-Sarani.