The Hindu Business Line : Trade unions seek higher return on EPF, cite bank rates

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Trade unions seek higher return on EPF, cite bank rates

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Trustees board puts off decision on interest rate

THE UNION MINISTER for Labour, Mr Oscar Fernandes, and the CPFC, Mr A .Viswanathan, at the meeting of the Central Board of Trustees of the Employees Provident Fund in the Capital on Saturday. — Kamal Narang

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New Delhi Jan. 27 With bank interest rates moving up, labour leaders today mounted pressure on the Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) to raise interest rate on provident fund deposits of its nearly four crore subscribers from last year's 8.5 per cent. Employer representatives and the Government, however, stuck to the 8 per cent offer, saying this was all that was possible with the available resources.

Interest rate on PF deposits have been steadily coming down over the past few years.

In 2003-04, the then NDA Government reduced the interest rate from 9.5 per cent to 9 per cent but maintained an effective 9.5 per cent by declaring a bonus on the occasion of the golden jubilee year of the organisation.

In 2004-05, the first year of the present UPA Government, the interest rate was maintained at 9 per cent. In 2005-06, the rate was reduced to 8.5 per cent.

The Union Minister of Labour, Mr Oscar Fernandes, who is the ex-officio Chairman of the CBT, told reporters after the meeting that "though the rate of interest was on top of today's agenda, a decision on it was postponed till the next meeting." He said he would try to take up the issue with the Finance Minister soon.

The trade unions argued that since several banks are now paying up to 9.5 per cent interest for deposits for more than three years, the EPFO must at least offer that amount to workers as their funds were locked with the organisation for periods ranging between 20 and 30 years, the CITU leader and CBT member, Mr W.R. Varada Rajan, said after the meeting.

However, keeping in mind the rising trend in bank rates, the CBT today permitted the EPFO to park its funds in term deposits with banks, including private sector banks, subject to limit of 5 per cent of the deposit base.

But the CBT rejected the Finance Ministry's proposal to invest up to 5 per cent of its incremental deposits in the stock markets. Labour representatives argued that if the Finance Ministry could forego Rs 3,000 crore due to customs duty cut, then providing around Rs 1,000 crore as subsidy on PF interest should not be an issue with the Government.

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