Crucial meet on EPF rate cut today

The crucial meeting of the central board of trustees (CBT) would be held on Saturday to decide on the lowering of EPF interest rate in view of the recent cuts in the interest rates of special deposit schemes (SDS) which comprise over 80 per cent of the EPFO corpus. Most likely the CBT would decide to go in for a 100 basis point reduction in the interest rate implying that the rate would be 8.5 per cent as against the present rate of 9.5 per cent.

With this reduction of 100 basis point (that is, 1 per cent), the fund would earn a surplus of around Rs 200 crore, sources added. If the CBT decides to go in for a reduction of 50 basis point and make the rate 9 per cent instead of 9.5 per cent, then still the fund would be in a deficit to the tune of around Rs 100 crore, sources said. In its meeting held on May 22, the finance and investment sub-committee had recommended three rates of 8, 8.5 and 9 per cent interest, considering the falling interest rate in the economy and accordingly simulated the expected returns.

According to the sub-panel’s findings, only 8.0 and 8.5 per cent interest on EPF could earn them surplus, while 9.0 per cent could take the fund into problems with deficit. With only two options left (either 8.5 or 8.0 per cent), the sources said that the CBT might go in for 8.5 per cent interest as they held that a drastic 1.5 per cent reduction would have wider political ramifications.

Labour Minister and CBT chairman Sahib Singh Verma, who had earlier strongly vouched for retaining 9.5 per cent, is also likely to accept the proposal.