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EPFO rate at 8.5% for 2012-13; Unions protest as it's much less than Banks, PPF


26 Feb, 2013 7:25a.m.

The Employees Provident Fund Organization (EPFO) have finally agreed to increase interest rates paid to subscribers to 8.5% during the current fiscal, an increase of 0.25% compared to the last fiscal. 

There were a proposal of paying 8.6% interest, but the EPFO's calculations showed that it would be left with a deficit of over Rs 240 crore if it agreed to it.  At 8.5%, it now will have a surplus of a little over Rs 4 crore. The recommendation of the central board of trustees' (CBT) now needs to be notified by the finance ministry before actual payouts begin. 

Usually, EPFO announces interest rate at the beginning of the year, but there has been a delay this time. Trade unions have been pressing for an early meeting of the CBT to decide on the interest rate for the current fiscal.

EPFO rates

Unions have accepted the new rate under protest. "When banks pay 9-10% interest on fixed deposits and the government pays 8.8% on public provident fund accounts, then why is it paying only 8.5%," asked Pawan Kumar, organizing secretary of the Bharatiya Mazdoor Sangh, and a trade union representative on the CBT. The 8.25% EPF rate fixed for 2011-12 was a substantial decline from the previous year's 9.5%.

At Monday's meeting, union representatives, however, had their way on stock market investment by the entity and shot down a proposal by the finance ministry to allow EPFO to park funds in the equity market. "We have strongly rejected any attempt to link EPF funds to the stock market," Kumar said. But, the board accepted some relaxations in investment in public and private sector bonds, EPFO commissioner Anil Swarup said after the meeting.

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