Over three months after ratification by the finance ministry, the retirement fund body Employees’ Provident Fund Organisation (EPFO) is still in process of crediting the 8.55 per cent interest rate for its 6 crore subscribers for the previous fiscal — 2017-18.
Officials said the process is taking time as EPFO is undertaking a cross-verification exercise to match information from both employers and employees and to weed out inoperative accounts.
The crediting process has started for some zones and is likely to be over by the end of this month, the officials added. “There has been some delay but the process has started. We are undertaking cross verification of accounts… the crediting has started for some zones and will be over by the end of this month for all subscribers,” an EPFO official said.
“The huge number of inoperative accounts were becoming cumbersome. So, we are checking some details like date of birth of members before crediting the interest rate. Also, the deposits made by employers are being reconciled with the information on deductions of employees,” another EPFO official said.
The Central Board of Trustees of EPFO had in March 2016 decided to allow crediting of interest on inoperative accounts. Subsequently, on November 11, 2016, the government had amended the definition of inoperative accounts in the EPF Scheme as the ones where no claim has been made by the member after 36 months from the date of attaining the age of 55 years, that is, it shall be classified as inoperative after the member attains the age of 58 years. So, interest shall be credited to the account of a member only up to the age of 58 years.
Inoperative accounts as per earlier definition were defined as the accounts of members who did not receive contributions for a continuous period of three years and the interest on these accounts was stopped in 2011. Since the November 2016 notification was prospective, the interest rate was not credited on such accounts from 2011 to 2016.
As per a Lok Sabha question answered by labour minister Santosh Kumar Gangwar in April this year, the amount in inoperative accounts where the date of birth is available is Rs 1094.09 crore (as per the amended definition), while earlier in April 2017, Dattatreya (then Labour Minister) in his reply to a question in Lok Sabha had said that over Rs 40,000 crore was the amount in inoperative accounts.
A query sent to EPFO’s Central Provident Fund Commissioner seeking reasons for the delay in crediting of interest did not elicit a response.
In February, the Central Board of Trustees had recommended slashing the interest rate for its 5 crore subscribers to a five-year low of 8.55 per cent for 2017-18 from 8.65 per cent in the previous year. The EPF rate was ratified by the finance ministry in April.
Subsequently, in May, the labour and employment ministry had instructed all regional PF commissioners to facilitate the crediting of 8.55 per cent interest for 2017-18 into PF accounts of members.
The EPFO has switched to a new accounting policy according to which subscribers will have the option to enhance or reduce their equity-linked investments from the current limit of 15 per cent. This recommendation, however, will be explored after the implementation of the new methodology, according to which only up to 15 per cent of the equity-linked units will be credited to subscribers, while all units over and above this allocation would be held by EPFO.
All EPF subscribers would then individually have two account heads — Fixed Income, where fixed annual interest will get credited to member’s account and Equity, where investment in equity will be reflected as units and the return would be marked to market.