The Finance and Investment Committee (FIC) of the Central Board of Trustees (CBT) is believed to have pushed for a lower interest rate of 8.5 per cent for the year 2011-12 on PF deposits at its meeting on Thursday. At present, these deposits attract a 9.5 per cent interest rate.

The FIC met a day ahead of the CBT meeting on Friday to decide on the rate that will affect over 4.7 subscribers to the retirement fund.

“FIC opined that a 8.25 per cent rate of return is feasible,” a source privy to the development told PTI, and added that unions demanded 9.5 per cent and pointed out inaccuracies in income projection by EPFO officials.

“We will strongly demand a 9.5 per cent rate in tomorrow's meeting”, the INTUC President, Mr G. Sanjeeva Reddy, a CBT member, told Business Line .

At the meeting, union representatives sought clarification about the income estimation error of Rs 458.73 crore, saying that when the rate of return on over 85 per cent of EPFO investments was fixed, how could it calculate the amount on its entire possible income.

The Employees' Provident Fund Organisation has reduced 2.5 per cent (Rs 458.73 crore) as estimation error from an estimated income of Rs 18,349.20 crore in FY12 and projected an income of Rs 17,890.47 crore, sources said.

Unions said that if the estimation error was properly factored in, around Rs 400 crore could be spared, sufficient to pay additional 0.25 per cent over the projected 8.25 per cent rate of return this fiscal.

According to EPFO estimates, an 8.5 per cent rate of return would leave a deficit of Rs 526.44 crore, but unions said interest income on inoperative accounts not being paid from April 1, 2011 would make up for it.

They said about Rs 15,000 crore was lying in inoperative accounts that have been invested and were yielding returns. Inoperative accounts are those that have not received any contribution for 36 months or more.

aditi.n@thehindu.co.in

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