Follow Us:
Sunday, May 29, 2022

EPF Interest Rate: CBT calculations show a sizeable surplus even at 8.8% payout

For 2014-15, EPFO had a surplus of Rs 1,604.05 crore for 2014-15 on a total principal amount of Rs 3.30 trillion rupees.

Written by Aanchal Magazine |
April 29, 2016 1:33:28 am
Employee Provident Fund, EPF news, india EPF, EPF dates, provident fund, india news, latest news, business news, arun jaitley Finance Minister Arun Jaitley. (Source: PTI)

The Ministry of Finance may have asserted that Employees’ Provident Fund’s (EPF) earnings in 2015-16 are not “even sufficient” to pay the lower interest rate of 8.7 per cent ratified by it, the Central Board of Trustees of Employees’ Provident Fund Organisation (EPFO) calculations record that there is a sizeable surplus even if 8.8 per cent interest was to be paid.

While the EPFO calculations do not take into consideration the interest to be paid on inoperative accounts, a concern which finance ministry has even highlighted for lowering the interest rate, the CBT members said their estimates are based on principal amount till September 30, 2015 and that the actual amount for the whole year will be even higher.

According to EPF calculations based on the principal amount as of September 30, 2015, an interest rate of 8.95 per cent, which was the original recommendation of the CBT, the surplus with EPF would have been Rs 91.40 crore. The interim rate of 8.8 per cent would have in turn resulted in a surplus of Rs 673.85 crore and a higher rate of 9.0 per cent would have created a deficit of Rs 102.75 crore, the EPFO data showed.

For 2014-15, EPFO had a surplus of Rs 1,604.05 crore for 2014-15 on a total principal amount of Rs 3.30 trillion rupees.

Best of Express Premium

Why I fell in love with Microsoft’s Surface Laptop Studio despite its sho...Premium
Penalties for delays, cuts in weekly pay: Life gets riskier for 10-minute...Premium
The Sunday Profile: Father, son and ‘holy suits’Premium
Tavleen Singh writes: India must choosePremium

“Our estimates are based till September 30, 2015. The actual surplus amount for 2015-16 will in fact be even higher. Inoperative accounts are much lesser than being projected and we have enough money to make interest payment for them. The government does not have to spend their money, so there should not be a cause of concern,” Employees’ representative on CBT and Bharatiya Mazdoor Sangh’s general secretary Virjesh Upadhyay said.

On Wednesday, a finance ministry official had said that “there is no plan of reversing the decision as of now” and defended the ministry’s decision citing concerns over the drawdown on surplus of last year that would adversely hit maintenance of relatively stable returns to investors for next year in a falling interest rate scenario. Also, the ministry has raised concerns regarding the pending updation of around 3 lakh accounts as of March 31, 2016.

In its 212th meeting on March 29, CBT of EPFO had decided to allow accrual of interest for over 9 crore inoperative accounts having a principal of over Rs 35,000 crore beginning April 1, 2016, reversing the decision of previous UPA government, which had stopped interest payments on inoperative accounts in 2011.

Trade unions are caught in a wrangle with the government demanding a rollback of its decision to lower the interest rate for EPF subscribers to 8.7 per cent. Some trade unions’ representatives met Minister of State for Finance Jayant Sinha on Thursday asking for a withdrawal of the finance ministry’s decision to ratify a lower rate, which has not been notified yet.

The lower rate ratified by finance ministry has been in line with the government’s move last month, when the finance ministry slashed interest rates across a number of savings schemes, including the vastly popular Public Provident Fund, the Kisan Vikas Patra, the National Saving Certificate and the five-year Monthly Income Scheme. This follows a series of rate cuts by the Reserve Bank of India, which has brought down interest rates by 150 basis points over the last 16 months.

The Centre has already backtracked on two decisions related to EPF. Earlier, on April 19, under pressure from protesting trade unions, mainly in Bengaluru, the Centre had cancelled a notification that tightened rules for the withdrawal of EPF accumulations till the age of 58.This followed another rollback of its Budget proposal to make 40 per cent of the EPF corpus taxable on withdrawal.


For all the latest Business News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard