The Finance and Investment Committee (FIC), the key advisory body of the retirement fund manager, Employees’ Provident Fund Organisation (EPFO), recommended an 8.5 per cent interest on provident fund (PF) deposits for 2010-11, the same level as in the past five years.
FIC, at its meeting on Friday, took a decision on the interest rate for the coming financial year, which will be placed before the Central Board of Trustees (CBT), EPFO’s apex body, for final approval.
The FIC recommendations, which would have an impact on 47.1 million depositors, are usually accepted by CBT.
“FIC has firmed up its view to maintain 8.5 per cent interest rate on deposits for 2010-11, despite opposition from trade union representatives. The decision would leave a surplus of Rs 15.26 crore,” an EPFO source said.
“Since raising rate to 8.75 per cent for the next financial year would result in a huge deficit of Rs 426.53 crore, FIC decided to pay 8.5 per cent for the sixth year in a row,” he said.
The employees’ representatives, including Hind Mazdoor Sabha (HMS) Secretary A D Nagpal and Bharatiya Mazdoor Sabha (BMS) Secretary B N Rai objected to the 8.5 per cent rate, arguing that the rate of return was decided after taking into account conservative income estimates.
“The employees’ representatives asked to place a statement showing last five years’ actual and projected income of EPFO’s huge corpus of Rs 2.57 lakh crore,” he added.
The unions have been demanding an interest of 9.5 per cent for 2010-11. EPFO, with a subscriber base of over 4.7 crore has been maintaining the return of 8.5 per cent on deposits since 2005-06.
It has estimated an income of Rs 15,036 crore in 2010-11 and that maintaining an 8.5 per cent interest rate in next financial year means interest payout of Rs 15,020.80 crore and a surplus of Rs 15.26 crore. Maintaining a 9 per cent return would result in a deficit of over Rs 868 crore.
