Retirement fund body EPFO is likely to retain 8.8 per cent rate of interest on EPF deposits for the current fiscal for its over four crore subscribers -- same as 2015-16 -- at its trustees meeting on Monday.
“The Employees Provident Fund Organisation’s apex decision making body, the Central Board of Trustees (CBT), may decide to retain 8.8 per cent rate of interest on EPF for the current fiscal tomorrow in its meeting in Bangalore,” said a source.
“Although providing 8.8 per cent rate of interest for the current fiscal will leave a deficit of Rs 383 crore, the body wants to utilise about Rs 409 crore surplus with it, which accrued after providing 8.8 per cent rate of interest for 2015-16,” the source added.
He further said: “Labour Ministry top brass has been pursuing Finance Ministry higher ups to convince them for retaining 8.8 per cent rate for this fiscal to avoid any embarrassment.”
The Finance Ministry had earlier this year decided to lower interest on EFF for 2015-16 to 8.7 per cent from the 8.8 per cent approved by the CBT headed the Labour Minister.
The government had to roll back the decision and provide 8.8 per cent rate of interest on EPF deposit for 2015-16 following protests by trade unions.
As per the EPFO income projections of Rs 39,084 crore for the current fiscal, providing 8.8 per cent rate of interest on EPF deposits will leave a deficit of Rs 383 crore. There would be a surplus of about Rs 69.34 crore if interest rate is lowered to 8.7 per cent.
The source said the Finance Ministry has been asking the Labour Ministry to align the EPF interest rate with other small saving schemes of the government like Public Provident Fund (PPF).
In September, the government reduced interest rates on small savings schemes marginally by 0.1 per cent for the October-December quarter of 2016-17, which resulted in lower returns on PPF, Kisan Vikas Patra, Sukanya Samriddhi Account, among others.
The Labour Ministry however wants to retain 8.8 per cent for the current fiscal as well, said the source. The EPFO trustees will also consider a proposal to reduce the administrative charges to 0.65 per cent of total wage on which contributions are payable from 0.85 per cent at present.
This will result in total annual savings of Rs 1,000 crore for around six lakh employers covered by the EPFO.
The trustee will also consider the proposal to abolish administrative charges on firms to fund expenditure in implementing the Employees’ Deposit Linked Insurance Scheme (EDLI), 1976.
The agenda says that this could be seen as an attempt to promote the “Ease Of Doing Business in India” and to make Indian business more competitive.
It said that all administrative expenses of EDLI may be met from interest of EDLI corpus.
The administrative charges to run EDLI scheme is 0.01 per cent while inspection charges is 0.005 per cent for firms, which subscribes to insurance schemes in lieu of EDLI Scheme.
The total corpus in EDLI administration account as on March 31, 2016 is Rs 2,372.83 crore. The interest generated on such a corpus would be around Rs 17.5 crore annually.