Even as the Finance Ministry decided to pare interest
rates on several small savings schemes to foster a lower interest rate
regime, the board of trustees of the Employees’ Provident Fund
Organisation (EPFO) on Tuesday recommended an 8.80 per cent rate of
return on Rs.10 lakh crore of retirement savings under its watch for
2015-16.
Labour Minister Bandaru Dattatreya who
announced the decision on Tuesday after a meeting of the EPFO board in
Chennai, however, said this rate was meant as “interim relief” for
workers and the board would meet again later to discuss the possibility
of a further interest rate hike.
Trade unions not happy
Although
the rate for this year is a notch higher than the 8.75 per cent paid
out in 2014-15, trade unions were disappointed as the Finance and
Investment panel of the EPFO board had earlier recommended a higher
interest of 8.95 per cent on EPF savings.
The EPFO
had earlier proposed 8.90 per cent as rate of interest to the Labour
Ministry and suggested taking an in-principle approval from the Finance
Ministry.
However, the Finance Ministry that has
decided to moderate the returns on small savings instruments from April
1, 2016, wanted the EPF rate to fall in tandem. The EPFO Board’s
proposal would be vetted and ratified by the Finance Ministry, so it
could still overrule the 8.80 per cent rate recommendation.
“We
had last time given 8.75 per cent and this time, seeing the situation,
we are declaring 8.8 per cent for the workers,” he told reporters after
the meeting. There are as many as 8.5 crore EPF accounts.
“We
have strongly protested the move to declare the rate of interest at
8.80 per cent in the board meeting today. The Board’s Financial and
Investment panel had recommended 8.95 per cent interest that would have
left a surplus of Rs. 91 crore,” said Prabhakar Banasure, a member of
the Financial, Investment and Audit Committee (FIAC) of the EPFO who was
present in the board meeting.
“This is unacceptable.
In the past, the Board always adopted the recommendations of the FIAC.
We asked the Minister to wait for the audit of the 2015-16 balance sheet
before declaring the interest rates. However, he didn’t agree,” he
added.
Data that may be helpful:
Important Points:- The Employees' Provident Fund Organisation (abbreviated to EPFO), is a statutory body of the Government of India under the Ministry of Labour and Employment. It administers a compulsory contributory Provident Fund Scheme, Pension Scheme and an Insurance Scheme
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