New Delhi: Retirement fund body Employees’ Provident Fund Organisation (EPFO) is likely to retain 8.8% rate of interest on EPF deposits for the current fiscal for its over four crore subscribers— same as 2015-16— at its trustees meeting tomorrow.
“The Employees Provident Fund Organisation’s apex decision making body, the Central Board of Trustees (CBT), may decide to retain 8.8% rate of interest on EPF for the current fiscal on Monday in its meeting in Bangalore,” a person aware of the development said. “Although providing 8.8% rate of interest for the current fiscal will leave a deficit of Rs383 crore, the body wants to utilise about Rs409 crore surplus with it, which accrued after providing 8.8% rate of interest for 2015-16,” the person added.
He further said: “Labour ministry top brass has been pursuing finance ministry higher ups to convince them for retaining 8.8% rate for this fiscal to avoid any embarrassment.” The finance ministry had earlier this year decided to lower interest on EFF for 2015-16 to 8.7% from the 8.8% approved by the CBT headed the Labour Minister.
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The government had to roll back the decision and provide 8.8% rate of interest on EPF deposit for 2015-16 following protests by trade unions. As per the EPFO income projections of Rs39,084 crore for the current fiscal, providing 8.8% rate of interest on EPF deposits will leave a deficit of Rs383 crore. There would be a surplus of about Rs69.34 crore if interest rate is lowered to 8.7%.
He further said the finance ministry has been asking the labour ministry to align the EPF interest rate with other small saving schemes of the government like Public Provident Fund (PPF). In September, the government reduced interest rates on small savings schemes marginally by 0.1% for the October-December quarter of 2016-17, which resulted in lower returns on PPF, Kisan Vikas Patra, Sukanya Samriddhi Account, among others.
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The labour ministry however wants to retain 8.8% for the current fiscal as well, said the person aware of the news. The EPFO trustees will also consider a proposal to reduce the administrative charges to 0.65% of total wage on which contributions are payable from 0.85% at present. This will result in total annual savings of Rs1,000 crore for around six lakh employers covered by the EPFO. The trustee will also consider the proposal to abolish administrative charges on firms to fund expenditure in implementing the Employees’ Deposit Linked Insurance Scheme (EDLI), 1976. The agenda says that this could be seen as an attempt to promote the “Ease Of Doing Business in India” and to make Indian business more competitive.
It said that all administrative expenses of EDLI may be met from interest of EDLI corpus. The administrative charges to run EDLI scheme is 0.01% while inspection charges is 0.005% for firms, which subscribes to insurance schemes in lieu of EDLI Scheme. The total corpus in EDLI administration account as on 31 March 2016 is Rs2,372.83 crore. The interest generated on such a corpus would be around Rs17.5 crore annually.