Not so provident

On reports suggesting that the Central Board of Trustees may raise the rate of interest on PF
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First Published: Mon, Feb 25 2013. 12 14 AM IST
Photo: Ramesh Pathania/Mint
Photo: Ramesh Pathania/Mint
In a country with virtually no social safety nets, the provident fund (PF) is probably one of the few instruments that a large number of employees have for a rainy day. It is not surprising that there is constant pressure on its trustees to maintain a constant upward creep on returns for its subscribers. Further pressure for such a move is due to an inflationary environment, in which returns on PF are barely positive (when inflation is measured with the Wholesale Price Index). Reports suggest that when the Central Board of Trustees meets, it may raise the rate of interest on PF. This will not be prudent.
If that happens, there will be barely any surplus left after a rate increase. A better option for decent returns is to change the risk profile of the fund and opt for slightly riskier instruments. There is no need for panic here as not all market investments can be dubbed as being reckless.
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First Published: Mon, Feb 25 2013. 12 14 AM IST
More Topics: provident fund | PF | interest rate |
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