EPFO trustees decide to pay 8.75 pct interest rate on PF deposits for 2014-15

Written by PTI | New Delhi | Updated: Aug 27 2014, 01:19am hrs
Provident fundThe EPFO has about 5 crore subscribers and the decision will have a bearing on their retirement fund. (AP)
Retirement fund body EPFO today announced 8.75 per cent rate of interest on provident fund deposits for the current fiscal, a move which would benefit its over five crore subscribers across the country.

The decision to retain interest rate of 8.75 per cent was taken at a meeting of EPFO's apex decision making body the Central Board of Trustees chaired by Labour Minister Narendra Singh Tomar here in the capital.

"EPFO will provide 8.75 per cent rate of interest on PF deposits for 2014-15," Tomar told reporters after CBT meeting.

As per practice, now the Employees' Provident Fund Organisation's (EPFO) trustees' decision would be implemented after the concurrence of the finance ministry.

EPFO's Central Provident Fund Commissioner K K Jalan said, "The benefit under the Employees' Deposit Linked Insurance (EDLI) Scheme would be increased to a maximum sum assured of Rs 3.6 lakh from existing Rs 1.56 lakh."

The sum assured under EDLI is provided in proportion to monthly wage ceiling which is Rs 6,500 at present. It would be enhanced to Rs 15,000 per month soon.

Senior Labour Ministry officials present in the meeting apprised the board that the notification regarding enhancement of wage ceiling has been sent to press after Law Ministry's clearance and will be reality soon.

They also told that the notification providing minimum monthly pension entitlement of Rs 1,000 under the Employees' Pension Scheme run by EPFO will also be notified simultaneously. After notification, around 28 lakh pensioners getting less than Rs 1,000 per month would immediately benefit.

At present all those employees with basic wages of up to Rs 6,500 per month at time of joining, can become member of EPFO schemes. Now with increase in wage ceiling around 50 lakh more workers are expected to come under the ambit of EPFO.

The minister also revealed that the board has decided to appoint credit rating agency CRISIL as consultant for the third time to engage new fund managers and evaluate their performance for three-year term beginning April 1, 2015.

After Crisil is appointed as consultant, it would take at least three months time to appoint fund managers for EPFO.

According to an official statement, during the meeting the proposed pattern of investment by Finance Ministry was discussed by the CBT and the Board was not in favour of investing in equities and Exchange Traded Funds (ETFs).

It was decided to recommend for making the pattern more flexible to further increase the percentage of investment in government securities.

The Board also discussed the feasibility of deployment of funds in AAA rated Central/State Public Sector Undertakings.

Without giving details about specific proposals, the Labour Minister said that board decided to set up a PSU cell within its Investment Monitoring Cell (IMC) to negotiate with primary issuers (of bonds) on behalf of all fund managers.

State-run NTPC has made a proposal seeking an EPFO investment of Rs 10,000 crore in its secured non-convertible bonds under a long term agreement from 2014-15.

The trustees also decided to go in for short term (not exceeding 15 days) borrowing of funds for participation in primary auction of securities.

This move is expected to result in EPFO getting to invest in securities at more profitable rates. The funds would be borrowed by means of CBLO, Corporate Term Repo and other such instruments for participation in primary auction of government securities and corporate bonds.

The board also decided to constitute a sub committee for construction and contract workers. The Committee shall examine the various issues regarding the coverage of employees engaged in this sector and shall recommend strategies to widen the coverage and enrollment in this area.

Board was told that SBI has reduced its service charges for collecting PF contribution to Rs 1.80 per Rs 1,000 for net based transaction and Rs 2.40 per Rs 1,000 for physical transaction form the existing uniform rate of Rs 3.

It is expected that this reduction in rates shall result in substantial savings to the tune of around Rs 100 crore per annum for the EPFO.