New Delhi: The Employees’ Provident Fund Organisation will not be able to pay more than 8.5% interest on PF deposits during 2009-10 as it has no reserves left following a Rs139 crore deficit incurred last fiscal.
“There are no reserves which could be used as alternative option for additional funds for giving higher rate of interest than 8.5% this fiscal”, said an agenda note for next month’s meeting of the Central Board of Trustees to be chaired by labour minister M. Mallikarjun Kharge.
The CBT, the highest policy-making body of the EPFO, is meeting on 4 July, to discuss and recommend the interest rate on PF deposits for the current fiscal.
In the agenda listed for the CBT (advisory body) meeting, the EPFO’s finance Committee recommended that “8.5% interest rate on PF deposits for this fiscal is feasible and leaves a surplus of Rs6.4 crore.”
Once the CBT, which is headed by the minister, recommends the interest rate on PF deposits, it is sent to the finance ministry for final approval.
During the last fiscal, EPFO had to suffer a deficit of around Rs139 crore to maintain interest rate of 8.5%. This deficit was later made up from the available contingency fund of around Rs150 crore.
At present, there are about 4.49 crore subscribers and they have been receiving 8.5% interest on their deposits since 2005-06. The organisation is expected to earn an income of Rs12,994 crore in 2009-10.
It may not be possible for the EPFO to pay 8.75% interest in the current fiscal as higher rate would result in a deficit of Rs366.77 crore. At 9%, the losses would further mount to Rs739.94 crore, an EPFO source said.
From 2002-03, the interest rate remained 9.5% for three consecutive fiscals. The rate of interest was 11 and 11.25% in 2000-01 and 2001-02 respectively.
It maintained an interest rate of 12% for 10 years during 1989-90 to 1999-2000.