EPFO raises 'interim' interest rate to 8.8%

Dattatreya says rate could be revised later; trade unions demand 8.95%

The Employees' Provident Fund Organisation (EPFO) on Tuesday marginally raised the interest rate by 0.05 percentage points to 8.8 per cent for 2015-16, benefiting its 50-million subscribers' safety net and yet leaving a surplus of Rs 673 crore with itself. However, the interest rate could be revised upwards later.

The decision was taken at a meeting of the Central Board of Trustees (CBT) chaired by Union labour minister Bandaru Dattatreya in Chennai.

Dattatreya said the decision on interest rate was an interim one, leaving the doors open for further revision of the interest rate for the current financial year in the wake of trade unions' demand for 8.95 per cent.

According to preliminary estimates, with an interest rate of 8.8 per cent, the surplus would be around Rs 673 crore.

"We want to safeguard workers' interest; we want to give a real and purposeful picture before the workers, and that is why a long debate took place today (on Tuesday)," said Datttreya, adding: "We will revisit the interest rates based on revised estimates."

EPFO had kept the rate unchanged at 8.75 percent for the past two financial years.

According to trade unions, EPFO can afford to raise the rate to 8.95 per cent.

"This is not up to our expectation. We strictly oppose this and have conveyed our opposition to the chairman. The minister said the rate was an interim interest rate. This is a new procedure," said Prabhakar J Banasure, secretary of the Bharatiya Mazdoor Sangh, who attended the meeting.

"The chairman said the market is going down and hence higher rate cannot be recommended now," Banasure added, saying the issue would come up again in the next meeting.

Earlier, the financial audit and investment committee (FIAC) had suggested a rate of 8.95 percent for FY16. The committee comprising representatives of employees, employers and the government, projected that EPFO would earn Rs 34,844 crore in 2015-16, which would be sufficient to offer an interest rate of 8.95 per cent.

EPFO distributes interest rate according to the income generated from its investments every year and does not take money from the government. "This is for the first time in history the agenda was not placed to us before the meeting and the CBT has not gone with the suggestion of the FIAC," said Banasure.