Finmin for EPFO's reserve fund to protect interest of workers

Finance Ministry wants that Employees Provident Fund Organisation (EFPO) should create a reserve fund to protect the interest of over five crore subscribers from falling interest rate regime.
While ratifying interest rate of 8.8 per cent on Employees Provident Fund (EPF) for 2015-16, sources said it advised the Labour Ministry to create a reserve fund for future to protect workers from interest rate shocks in a regime of falling interest rates.
The Ministry of Labour had sought Finance Ministry's ratification of rate of interest at 8.8 per cent on the EPF accumulations for 2015-16.
However, the Finance Ministry ratified the rate of 8.7 per cent since there was apprehension about use of past surplus funds and non-provisioning of enough amount to meet liabilities of inoperative accounts.

The decision of Finance Ministry was based on pure arithmetic calculation and in the interest of all the members of EPFO.
However, sources said, during discussion on April 28, followed by a letter dated April 29 Labour Ministry clarified to Finance Ministry that the earnings in 2014-15 turned out to be more than the estimates and the same was used to recommend 8.8 per cent interest rate.

Further, it was clarified that EPFO is doing separate provisioning for possible principal and interest payouts on inoperative accounts and the same is not disbursed among active members, sources said.
As per the procedure, the interest rate on EPF accumulations is administered by the Labour Ministry on the recommendations of Central Board of Trustees (CBT) of EPF.

Finance Ministry ratifies the rates on the basis of proposal from Labour Ministry, taking into account the financial sustainability and ensuring stable returns to the investors.