The Hindu Business Line : PF rate

This is with reference to the editorial "Whose interest?" (Business Line, August 12). It is true that while there is no surprise in scaling down the PF interest rate to 8.5 per cent, which was well implied by the postponement of the decision by the Government.

The Government has really failed to convince the labour force that the return of 8.5 per cent is a good deal. Of course, the Centre may be able to borrow at lower rates in the falling interest regime. But who says that the PF funds should be lent only to the Government? There are ample numbers of other market players who can offer better returns. The only difference is that one can lend to the Government with practically no risk.

The Trade unions would have been happy if the existing rate of 9.5 per cent is continued. But it is significant to note that the unions could not prevail upon the Government to make a more transparent judicious deal for the workers.

The huge influx of the retail investors to the IPO market is an obvious creation of the low interest regime. But the PF subscribers, mostly employees, cannot bet the fortunes for statutory bars or otherwise. Every employee is legally bound to remit a certain amount to the PF. Also, no employee may be willing to invest his funds elsewhere, where there is even a slight element risk

In effect, the PF subscribers are left with no other alternative even if the interest rate is reduced further. The Government may be quite lucky to factor in this element while considering the interest fixation of the PF.

In short, it is better to believe that the bad time for the conventional depositors has affected the PF subscribers as well.

C. P. Velayudhan Nair

Kochi

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