EPFO fails to fix interest rate, wants FinMin to decide

Amid differences between representatives of employees and employers, the EPFO failed to take a decision today on the interest rate to be paid to its 4.7 crore subscribers for 2011-12 and asked the Finance Ministry to take the final call.

The Employees' Provident Fund Organisation (EPFO) will forward different suggestions with respect to payment of interest on provident fund deposits for the current fiscal to the Finance Ministry for a final decision, Labour Minister Mallikarjun Kharge said after a meeting of the Central Board of Trustees (CBT), the highest policymaking body of the EPFO.

While the EPFO has suggested payment of interest at the rate of 8.25% for the fiscal, the trade union members insisted that it should be 9.5%. The representatives of employers wanted the interest rate to be fixed at 8.5%. The EPFO paid 9.5% interest to its members during 2010-11.

According to sources, this was the first time that the CBT has failed to take a call on the interest rate and has asked the Finance Ministry to decide the issue.

Making a case for payment of 9.5% interest, the trade union members, according to sources, argued that the EPFO cannot pay less than 8.6% interest, the rate offered by the government under the Public Provident Fund (PPF) scheme. The Financial Advisory Committee (FIC) of the EPFO, however, had suggested payment of 8.25% interest in 2011-12.

According to estimates worked out by the EPFO, the payment of 8.25% interest during 2011-12 would result in a deficit of a mere Rs 24 lakh vis-a-vis its earnings.

It had further pointed out that an 8.5% rate of return for subscribers would translate into a deficit of Rs 526.44 crore.