New Delhi: Ahead of the Budget, the Employee’s Provident Fund Organisation’s policy making body Central Board of Trustees meets on Saturday to take a call on interest rate on provident fund for 2008-09, which will benefit about 4.5 crore employees.
The body, according to the current indications, is expected to retain 8.5% interest rate on PF deposits during the current fiscal.
The decision of EPFO on interest rate, which has to be vetted by the finance ministry, will come two days ahead the budget, to be presented in the Lok Sabha on 6 July.
The CBT, headed by the labour minister, will also deliberate on the other important issue of investing 15% of Employees’ Provident Fund Organisation’s corpus of about Rs1.82 lakh crore in stock markets as suggested by the finance ministry in August last year.
It is expected that CBT will settle for 8.5% interest rate on provident fund deposits during 2009-10 as payment of higher amount would result in a deficit in the EPFO’s account.
The Organisation has no reserves left to pay higher interest rate than 8.5%this fiscal as it had suffered a Rs139-crore deficit during 2008-09 for maintaining the same rate of interest on deposits, the sources said.
The deficit of Rs139 crore was later made up from the available Contingency Fund of around Rs150 crore.
“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 tomorrow’s CBT meeting to be chaired by labour minister M. Mallikarjun Kharge.
In the agenda listed for the CBT 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 CBT recommends the interest rate on PF deposits, the proposal will be sent to the finance ministry for final approval and notification.
The proposal to park funds in the stock market, it may be recalled, was rejected by the EPFO’s Finance and Investment Committee at its meeting on 26 March. The recommendations of Finance and Investment Committee are usually accepted by the CBT, which has the final authority to take any policy decision.
The finance ministry in August last year had suggested an investment pattern to EPFO under which the organisation could park up to 15% of its funds in the companies listed on the Bombay Stock Exchange and the National Stock Exchange and also equity-linked schemes of Sebi-regulated mutual funds.