Ambarish Mukherjee

New Delhi, April 8

A LARGE section of subscribers of the Employees Provident Fund Organisation (EPFO), who are seeking housing loans from their accounts, are a peeved lot today. With the Ministry of Finance dithering for the last three financial years over notifying the interest rate on PF dues, subscribers are being forced to settle for lower housing loans than what their entitlement would have been, had the interest being credited to their accounts.

For instance, a person who has a balance of Rs 2 lakh in the PF account on March 2002, the entitlement of housing loan would be reduced by around Rs 54,000 because of absence of the interest amount for the three years.

The Finance Ministry has not made a formal notification for paying 9.5 per cent interest rate on the subscribers' provident fund balances for fiscal 2002-03, 2003-04 and 2004-05. Though decisions regarding payment of 9.5 per cent per annum had been taken at the highest level of this Government as well as the previous Government and there are no possibilities of reverting these decisions, the Finance Ministry is sitting over it without citing any reason.

For an average person with a balance of Rs 2 lakh on March 2002, three years compounded interest at 9.5 per cent per annum would stand around Rs 60,000. So on March 2005, his total provident fund balance should have been Rs 2.6 lakh, even if the contribution made during the past three years and the interest that would have accumulated on such contribution is not accounted for.

As per the rules, a provident fund subscriber can take up to 90 per cent of the total balance for housing purpose. On a balance of Rs 2 lakh, he can take loan up to Rs 1.8 lakh. On a balance of Rs 2.6 lakh, his entitlement stands increased by Rs 54,000 at Rs 2.34 lakh.

But he is not getting Rs 2.34 lakh but being offered only Rs 1.8 lakh by the provident fund authorities because the interest amount of Rs 60,000 is now lying in the Employees Provident Fund Organisation's (EPFO) account with the Government. It could be transferred to the individual subscriber's account only after the Finance Ministry issues formal notification, which is yet to see the light of the day.

EPFO officials, when contacted, said that though the number of housing loan application to the provident fund authorities have reduced in recent years, mainly on account of the low interest rate offered by the banking sector, still a large number of employees go in for provident fund loans and these technical delays are resulting in lower entitlement of the subscribers.

(This article was published in the Business Line print edition dated April 9, 2005)
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