Trustees’ decisions to be forwarded to FinMin’s approval
Over eight crore depositors will get a higher interest rate of 8.75 per cent on their provident funds for the year 2013-14, against 8.5 per cent in the last fiscal.
“We have decided to recommend to the Government 8.75 per cent rate of interest for 2013-14 to its subscribers,” Oscar Fernandes, Labour Minister, told reporters after a meeting of the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) here on Monday.
The trustees, who met after a gap of one year, also decided on early actuarial valuation of the Employees Deposit Linked Insurance Scheme. Pending actuarial valuation, it decided on an interim hike of 20 per cent over and above the admissible entitlements.
“This effectively means that the maximum limit of Rs 1,30,000 will now be Rs 1,56,000,” it said.
The decisions by the trustees will now be forwarded to the Finance Ministry for clearance, after which they will be notified.
The decision to hike interest rates comes at a time when the country is heading for general elections in April-May. Recently, Prime Minister Manmohan Singh had admitted that price rise was a factor in the Congress party’s defeat in the recent Assembly elections.
Sources said the higher interest rate was approved as the retirement body, which received Rs 77,000 crore as contributions in 2012-13, said it had surplus funds. The EPFO is estimated to have an income of Rs 20,796.96 crore in the current financial year.
According to the annual accounts approved in Monday’s meeting, the negative balance of the suspense account had been fully accounted for and there was now a positive balance. It also shows a growth rate of 16.14 per cent, 9.18 per cent and 9.48 per cent in respect of contributions of EPF, Employees Pension Scheme and EDLI scheme, respectively.
Employee representatives in the CBT, who were demanding an interest rate of 9.5 per cent, however, maintained that EPFO was in a position to declare 9 per cent for 2013-14.
“Rs 24,000 crore has been lying in inoperative accounts. With the norm that interest will not be credited to subscribers after a lapse of three years, there must be enough interest income to provide for at least 9 per cent rate,” D.L. Sachdeva, Secretary, All India Trade Union Congress and a CBT member, told Business Line. In 2010-11, provident fund deposits fetched an interest rate of 9.5 per cent, after which it was brought down to 8.25 per cent in 2011-12 and 8.5 per cent in 2012-13.