EPFO panel skirts proposal on 8.5% interest on deposits
“An 8.5 per cent interest rate is feasible. Even a partially higher interest rate of 8.6 per cent could result in a deficit of Rs 240.49 crore,” the Employees’ Provident Fund Organisation (EPFO) said, in a proposal placed before its investment advisory body — the Finance and Investment Committee (FIC), on Friday.
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.
But this may not be the last word on interest rates as members of the FIC refused to discuss the proposal since the EPFO had placed it before them at the last minute.
Instead, the committee led by Central Provident Fund Commissioner, chose to directly forward the issue to the Central Board of Trustees (CBT) to take a final call on the issue.
The CBT, the EPFO’s apex decision making body headed by labour minister Mallikarjun Kharge, is scheduled to meet on February 25.
“What is the point in springing such an issue before us at the last minute when there can be no proposer decision. They can take it directly to the CBT now,” said AD Nagpal, member of the FIC and secretary, Hind Mazdoor Sabha.
This was agreed to by BN Rai, another member of the FIC and secretary, Bhartiya Mazdoor Sangh and said, “For the first time in history, the interest rate proposal was brought as a table item before the FIC. This is against ethics and without any details on income and liabilities, we cannot take a decision.”
Since the proposal on interest rates is crucial as it impacts the retirement savings of over 8.15 crore subscribers, the EPFO traditionally sends it to the FIC members well in advance of the meeting date to ensure a proper discussion.
But worried that it could receive flak for not proposing a higher return on PF deposits, the EPFO chose to place it at the last minute.
However an EPFO official said, “We had listed it as part of the agenda but could not send it before hand as the calculations took us longer than expected.” Trade union leaders had earlier pitched for hiking the return on PF deposits to 8.8 per cent, which would bring it at par with the interest rate offered by the Public Provident Fund (PPF).
The increased payout, they had argued, would be possible by using returns on inoperative accounts, which have deposits of around Rs 22,000 crore.
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