Unions to press for 9% interest on PF deposits for FY16

They will oppose any proposal to retain the existing rate of 8.75% for the current fiscal

Central Trade Unions, including RSS-backed Bharatiya Mazdoor Sangh (BMS), will press for higher interest rate of 9% on PF deposits for 2015-16 for over 5 crore subscribers of the retirement fund body EPFO.

The unions have decided to oppose any proposal to retain the existing rate of 8.75% for the current fiscal along with a uniform bonus of Rs 200 to all subscribers at the meeting of the EPFO's trustees on February 16.

"We will demand 9% rate of interest for the current fiscal for Employees' Provident Fund Organisation (EPFO) subscribers. There is no provision of providing bonus in the scheme. We will oppose any such proposal." BMS General Secretary Vrijesh-Upadhyay told PTI.

He added: "The Finance Ministry is under pressure to maintain low interest rate on small savings at present. During consultations with the Labour Ministry, they might be working on alternatives to providing lower rate of interest on EPF."

Last month, the proposal to provide bonus of Rs 200 to every subscribers along with 8.75% rate of interest for 2015-16 was discussed in the EPFO's advisory body Finance Audit and Investment Committee (FAIC) meet.

However, the proposal was shot down by BMS representative and EPFO trustee P J Banasure.

He argued that there is no such provision of in Employees' Provident Fund Scheme and it would be injustice to all those who have been contributing more to the fund.

"You cannot pay a uniform bonus of Rs 200 across the board to all type of subscribers with different PF deposits. In a way this practice will discourage who are contributing more to the fund," Banasure said.

He also said that the FAIC has not finalised its recommendations on the proposal and it would be discussed in the next meeting.

He also informed that the next meeting of FAIC may be convened anytime before February 16 when EPFO's apex decision making body Central Board of Trustees' (CBT) headed by Labour Minister is scheduled to meet and consider proposal for deciding rate of interest on PF deposits.

EPFO's estimates worked out in September project that the body can easily pay 8.95% rate of interest as it would leave a surplus of Rs 100 crore.

However, it is expected that EPFO would be able to pay 9% interest rate as per latest income projections which would leave a surplus of over Rs 100 crore.

All India Trade Union Congress Secretary D L Sachdev said: "EPFO pays interest from its own income without an aid from the government. Thus it should pay 9% if it can."

The Finance Ministry wants to keep interest rate of small saving at a lower level so that the Reserve Bank can nudge banks to lower lending interest rate.

The lending rate of banks are still high after many rounds of key interest rate cuts by the Reserve Bank of India.