Centre withdraws cut on PF interest

Making a third rollback on provident fund (PF) deposits, the Centre on Friday changed its decision to cut the interest rate from 8.8% to 8.7% for the year 2015-16.

The Finance Ministry agreed to approve 8.8% interest as recommended by the Central Board of Trustees (CBT), the apex body of the Employees’ Provident Organisation (EPFO). The decision came on a day when trade unions were protesting nationwide against the cut in the interest rate. The Bharatiya Mazdoor Sangh (BMS), an RSS affiliate, had also protested on Wednesday.

The ministry had rolled back its decision to tax a part of PF withdrawals, which was proposed in the Budget. The opposition from trade unions, including the BMS, forced the government to withdraw the proposal. However, the second rollback decision was made only after huge protests and violence in Bengaluru. The government had to withdraw the changes it had made in the rules for PF withdrawals.

The government had banned the complete withdrawal and according to them, employees could not withdraw the employer’s contribution till they attained the age of 58. The government ultimately restored the old rules.

This time, the government changed a decision taken at the behest of its own minister. The CBT is headed by Labour Minister Bandaru Dattatreya. The CBT recommended 8.8% of interest for the year 2015-16. The finance ministry revised the rate to 8.7% on the ground that the return on deposits was not sufficient. The finance ministry had denied rolling back.

“The finance minister has agreed for 8.8% interest... We will issue a notification of 8.8% interest rate immediately,” announced a beaming Dattatreya.