EPF may plummet further from 9.5%

There could be some more bad news on the returns from the Employee Provident Fund front as it likely to plummet further from the present 9.5 per cent. It will be a double blow as the rate of interest on small savings has already come down as announced in the Budget.

The government has issued a notification last week by which the rate of interest on Special Deposit Scheme (SDS) is being cut from 9 to 8 per cent. Nearly 80 per cent of the EPF fund amounting to Rs 1,21,414 crores is invested in the SDS and any change in the rate of interest here will have an impact on the general rate of returns on the EPF. It will impact 32 million employees in 3,57,747 establishments. Seeing its wide-spread ramifications, this recent notification has even led to a stand-off between labour ministry and finance ministry. Labour Minister Sahib Singh Verma has met the Prime Minister and the Finance Minister on the issue requesting for a re-think on what he thinks could be an ‘‘un-popular’’ move affecting millions of citizens.

Board to meet today

NEW DELHI: In view of the proposed 1 per cent slash in interest rate on SDS from April, the Central Board of Trustees of Employees Provident Fund Organisation (EPFO) will meet on Friday to decide on the rate of interest on EPF for 2003-04. Being pressurised from the finance ministry to cut the rate of interest on EPF from the present 9.5 per cent, the meeting of EPFO board comes in the backdrop that SDS comprises over 80 per cent of over Rs 1,40,000 crore EPF corpus. (PTI)

In a letter addressed to the Finance Minister, Verma asked for compensation for this loss in revenue on SDS as the money is now locked in this particular fund. A couple of years back, the rate of interests was as much as 12 per cent. Even today certain corporations are willing to pay a rate of interest of 10 per cent but the labour ministry is bound to not withdraw from SDS and invest it elsewhere. The final call for the final rate of interest on EPF would be taken on March 28 when the re-constituted Central board of Trustees of the EPFO meets.

Though fresh funds from the EPF are not going to SDS, the interest that is earned on the initial corpus is ploughed back into the SDS. The government in-turn invests the money. According to the labour ministry, the announcement to cut 1 per cent interest of the SDS means that the returns will come down drastically and the ministry will not be in a position to pay 9.5 per cent to the employees.