The interest rate on PF deposits in the previous financial year was from 8.5 per cent.
The decision to raise interest rate was taken by the Central Board of Trustees (CBT), the apex decision making body of the Employees' Provident Fund Organisaton (EPFO).
"We have decided to recommend to the government 8.75 per cent rate of interest for 2013-14 to its subscribers," Labour Minister Oscar Fernandes, who chaired the CBT meeting, told reporters here.
The EPFO's recommendations would now be vetted by the Finance Ministry. Once the ministry gives its concurrence to the decision, the interest would be credited into the accounts of subscribers.
Elaborating on the decision to raise PF rate, EPFO's Central Provident Fund Commission K K Jalan said: "We have estimated an income of Rs 25,048.55 crore for 2013-14. EPFO would require 25,005.41 crore for providing 8.75 pre cent rate of interest for this fiscal and leave a surplus of Rs 43.14 crore."
EPFO also announced a 20 per cent increase on Employees' Deposit Linked Insurance Scheme, 1976 as an interim measure. Under this scheme, the family of a worker can get a maximum sum assured of Rs 1,30,000 in case of his/her demise during the service period. After 20 per cent raise, the maximum amount would now be Rs 1,56,000.
CBT has also approved increasing minimum administrative charges for managing EPF Scheme, 1952 and EDLI Scheme to Rs 500 and Rs 200 per month from existing rate of Rs 5 and Rs 2, respectively.
These charges for non-functional firms having no contributory members is also increased to Rs 75 and Rs 25 per month respectively for the two schemes.
EPFO has a corpus of around Rs five lakh crore.
When asked about EPFO's plans to improve investments, particularly Special Depositor Scheme (SDS) which earns just 8 per cent rate of return, Jalan said: "We will definitely take out money from SDS and invest in high yielding instruments. We will soon work on a proposal."
On the Labour Minister's idea of deducing extra 10 per cent on basic wages by EPFO for providing housing to workers, the Central Provident Fund Commissioner said: "We will definitely work on the proposal. He has a lot experience."
The CBT also initiated the process for selection of new multiple fund managers and constituted a committee to appoint a consultant for the purpose. At present, Crisil is providing consultancy services to the EPFO.
The trustees also asked the Finance, Investment and Audit Committee to look into the proposal which sought more freedom for EPFO to trade and exit investments besides allowing it to refrain from investing in bonds of states.
The board also reviewed the performance of its four fund managers since August, 2011. State Bank of India remained on the top by earning a return of 9.23 per cent on investments, followed by followed by Reliance Capital Asset Management at 9.19 per cent.
The other two fund managers, HSBC AML and ICICI Sec PD Ltd, earned 9.18 per cent each which was above the benchmark rate of 9.11 per cent.
EPFO also launched the electronic return facility for exempted establishments (private PF trusts). It will benefit over 3,000 exempted establishments which are now required to file their monthly and annual paper returns.
These establishments which are otherwise managing the provident fund trust on their own will now get the facility of electronically reporting about their work. This electronic return will replace the earlier monthly and annual paper returns filed by exempted establishments.
The CBT also decided to constitute the Executive Committee (EC); Finance, Investment and Audit Committee (FIAC); Committee on Exempted Establishment (private PF trusts) and Pension Implementation Committee.
The trustees adopted the draft annual report on the work and activities of EPFO for 2012-13 and also adopted the audited annual accounts for 2012-13.
One of the important features of the annual accounts was that negative balance of suspense account has been fully accounted for and there is now a positive balance in the suspense account.
The report also shows a growth rate of 16.14 per cent, 9.18 per cent and 9.48 per cent in respect of collection of contribution to EPF, Employees Pension Scheme and EDLI scheme respectively.
The board also gave an ex-post-facto approval to purchase ready build office space and residential apartments to be constructed by the National Building Construction Corporation at East Kidwai Nagar, New Delhi, keeping in view the shortage of space. The purchase of a new building will cost Rs 870 crore to the EPFO.