EPFO may lower the interest rate on deposits to 8.6%.

   Retirement fund body EPFO may lower the interest rate on deposits to 8.6 per cent for over 4.7 crore subscribers for 2011-12 to match it with the rate of public provident fund (PPF) scheme. The Employees’ Provident Fund Organisation (EPFO) had provided 9.5 per cent interest rate to its subscribers for 2010-11 after it found Rs 1,731 crore surplus in its books of account.

   “The Labour Ministry will soon be sending a note to the Finance Ministry, recommending 8.6 per cent rate of interest on provident fund deposits to EPFO subscribers for this fiscal as provided under PPF scheme”, a source privy to the development said.

   The source said the ministry wants bring the EPFO’s rate of return on par with the PPF rate.

   According to the EPFO’s income projections, if the body provides 8.25 per cent interest for 2011-12, it would leave a deficit of a Rs 24 lakh. It had further pointed out that an 8.5 per cent rate of return would translate into a deficit of Rs 526.44 crore.

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Clarification on Interest Rates on Small Savings Schemes

   Ministry of Finance has clarified that although the rate of interest on small savings schemes will be aligned every year with rates of Government securities of similar maturity, with suitable spread, the rates are fixed and not floating so far as individual investments except PPF are concerned. This is in response to news items appearing in certain sections of the Press that the interest rates on small saving schemes, revised by the Government w.e.f. 1.12.2011, are floating rates, which will undergo change according to fluctuations in the yield on the Government securities.

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