PF interest rate decision deferred

The apex decision making body of the Employees Provident Fund Organisation (EPFO), however, allowed the organisation to invest funds in corporate bonds of joint venture companies where government holding is at least 26 per cent, an official spokesman said.
The CBT meeting, chaired by Labour and Employment Minister Mallikarjun Kharge, also cleared the proposal for raising insurance benefit under the Employees Deposit Linked Insurance scheme from Rs 60,000 to Rs 1 lakh.

“We have decided to take some more time on deciding the interest rates and discuss with the Finance Ministry. After that we will decide,” Kharge told reporters after the meeting.

The decision on the interest rates, which will have implications for 4.7 crore subscribers will be taken at the next meeting of the CBT, the spokesman said.
The date for the next meeting is yet to be fixed.

The EPFO currently has a corpus of about Rs 2.5 lakh crore and, according to official calculations, the payment of interest rate of 8.5 per cent – the same as was given during the past five years – will ensure a surplus of Rs 15.26 crore.

As payment of higher interest of 8.75 per cent would have resulted in a deficit of Rs 426.23 crore, the CBT deferred the decision.

The demand of trade unions to raise the interest rate to 9.5-10.5 per cent would have caused a bigger hole in the EPFO treasury. 

Referring to investment of funds in bonds of joint venture companies, Labour Secretary Prabhat Chaturvedi said: “We want more revenues, first to invest money and then get better yield. But nothing in private sector. The decision is that it will only be in public and joint sector companies because we would like the money of the workers to be absolutely safe.”

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