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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Government approves 9.5% interest on PF deposits for 2010-11

   The finance ministry on Thursday approved higher interest rate of 9.5 per cent to over 4.7 crore depositors with the Employees Provident Fund Organisation (EPFO) for 2010-11.

   The EPFO had been paying 8.5 per cent interest on PF deposits since 2005-06.

   In September last year, it had recommended an increase in interest rate to 9.5 per cent for 2010-11 after discovering Rs 1,731 crore surplus in their books of accounts.

   "The finance ministry has ratified 9.5 per cent rate of return on PF deposits for 2010-11. We have received a notification in this regard," Central Provident Fund Commissioner Samirendra Chatterjee told the news agency.

   Chatterjee further added that "our calculations regarding Rs 1,731 crore surplus in the interest suspense account were found correct by the finance ministry and so they approved this higher rate of return".

   The finance ministry's approval is subject to the condition that any shortfall on account of payment of 9.5 per cent rate of return would be met by making adjustments in the interest rate in 2011-12.

   Chatterjee, however, said that there would be no need for making any adjustment in the next fiscal as "EPFO calculations are correct regarding the discovery of a surplus of Rs 1,731 crore in the interest suspense account."

   The finance ministry has also asked the EPFO to update its subscriber accounts within the next six months.

   EPFO's apex decision making body-the Central Board of Trustees (CBT)- in September last year had decided to provide 9.5 rate of return on retirement savings in 2010-11 after it found a surplus of Rs 1,731 crore.

   Refusing to ratify the said rate of return, the finance ministry had earlier argued that the surplus shown by the ministry was not real after CAG report has called the EPFOs so called surplus unverifiable.

   According to sources, the finance ministry approved 9.5 per cent interest after the intervention by Finance Minister Pranab Mukherjee.

Source;DDI NEWS

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