Provident fund to earn 8.5% interest in FY'13
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Provident fund deposits are set to earn 8.5 per cent interest in 2012-13, slightly higher than the 8.25 per cent returns declared in the last fiscal. The decision was taken at the meeting of the Employees' Provident Fund Organisation's (EPFO) Central Board of Trustees (CBT) on Monday.
"The CBT has recommended to the government that 8.5 per cent interest rate should be given to provident fund beneficiaries," said labour and employment minister Mallikarjun Kharge, who heads the Board, adding that the finance ministry will approve and notify the interest rate.
Trade union leaders had, however, called for a minimum 8.8 per cent return on PF deposits, as it would bring it at par with the interest rate offered by the Public Provident Fund.
But the EPFO had argued that 8.5 per cent was an optimal interest rate as even a marginally higher 8.6 per cent return could result in a deficit of Rs 240.49 crore. (See chart).
The calculations are based on an estimated income of Rs 21,146.96 crore to the EPFO from investments in 2011-12. However, about Rs 350 crore are required for updating 38 lakh accounts of members for the last fiscal, leaving the retirement fund manager with Rs 20,796.96 crore for 2012-13.
"We had a backlog in terms of updation of accounts of about Rs 350 crore which we have to adjust this year. So anything above 8.5 per cent would have incurred a loss," said Anil Swarup, central provident fund commissioner. The EPFO manages a corpus of Rs 5 lakh crore which consists of retirement savings of 8.15 crore members.
The CBT in its meeting also decided to review the system of inoperative accounts before taking a decision on whether or not to use the estimated Rs 22,000 crore deposits lying unclaimed in them. "We have to make sure no one will claim this money before we can distribute it amongst members," Swarup said.