Inactive EPFO accounts to earn interest from April 1

Lakhs of employees who have inoperative provident fund accounts with retirement fund body EPFO will start earning interest on them from April 1.

“The UPA government had stopped interest on such accounts (in 2011)’. But, the Modi government has restored it. It is a pro-worker decision,” said Labour Minister Bandaru Dattatreya, while announcing the decision after the 212{+t}{+h} meeting of the tripartite Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO), on Tuesday.

The UPA government had discontinued interest on idle accounts in a bid to persuade employees to withdraw the money or merge it with active accounts. The EPFO has since been earning money from the funds in these accounts, which are being invested. But, said Labour Secretary Shankar Agarwal, the earnings are not accruing to the person to whom this money belongs, explaining why the decision was reversed.

Out of a total of over 15 crore EPF accounts, about nine crore accounts worth ₹32,000 crore were inoperative as on March 31, 2015. Only about four crore accounts make contributions.

Accounts in which contributions have not been received for 36 months at a stretch and that have definite claimants are classified as ‘inoperative’. However, Agarwal clarified that interest would accrue to only those accounts that have become idle due to “cessation of employment”, not following a member’s death.

Investments from corpus On EPFO investments in various instruments, the Secretary said: “We had allowed investment of 5 per cent in equity. Now, out of the remaining 95 per cent, we can invest up to 65 per cent in government securities. Thus the share of private and public sector bonds will go down correspondingly.”

With regard to the 8.8 per cent interim PF interest rate for 2015-16 recommended by the Board, Agarwal said: “It has been referred to the Finance Ministry. We are awaiting a response.”

The EPFO is expected to receive about ₹1.12 lakh crore in deposits this fiscal year. It manages a corpus of over ₹8.5 lakh crore.

In Tuesday’s meeting, the Board also deferred a decision to introduce voluntary retention of Employees’ Deposit Linked Insurance to subscribers at a reduced rate of contribution for three years after cessation of employment.

Cadre revamp On restructuring the EPFO’s cadre after 19 years to ensure promotions and career advancement for its 20,000-strong workforce, the trustees decided, in principle, to set up an ‘Anomalies Committee’ to look into grievances.

“A small committee under the CPFC (Central Provident Fund Commissioner) will address all anomalies in a month’s time, after which the implementation will start,” Dattatreya said.

On Tuesday, EPFO employees held a ‘silent protest’ in Delhi, opposing curtailment of posts at a time when there were a large number of section officer vacancies, as also the proposal to link promotions with transfers, among other things.

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