New Delhi: In a move that will affect some 15.84 crore contributors to the Employees Provident Fund scheme, the government has cut the interest rate for 2015-16 marginally to 8.7 percent from the recommended rate of 8.8 percent.
The new rate came to light in a rather peculiar manner, with Labour Minister Bandaru Dattatreya informing the Lok Sabha about it in a written reply to a question posed by two lawmakers on Monday.
The Minster said the Central Board of Trustee of the Employees' Provident Fund (EPF) in its 211th meeting on February 16 this year had proposed an interim rate of interest at 8.80 percent to be credited to the accounts contributors for year 2015-16.
But the Ministry of Finance ratified an interest rate of 8.70 percent, he said in the reply to the questions from C.R. Chaudhary of the Bharatiya Jana Party and P. Nagarajan of the All India Anna Dravida Munnetra Kazhagam.
The minister also said that a proposal for comprehensive amendment to the relevant act on provident fund is under consideration, including a cut in the threshold limit for coverage from 20 employees in an organisation currently to 10 employees.
The government has been under criticism for its moves on several social security schemes.
Barely a week after presenting the budget in February, Finance Minister Arun Jaitley was forced to withdraw a proposal to tax 60 percent of provident fund withdrawals made after April 1 this year if they are not re-invested in annuity funds.
Then in a sudden move last month, the interest rates on all small savings schemes, including Public Provident Fund, Kisan Vikas Patra and Senior Citizen Deposits were cut sharply. The finance ministry said this was being done to align these schemes with the market.
Interest rate on Public Provident Fund was cut to 8.1 percent for April 1 to June 30, 2016, from 8.7 percent earlier; that on Kisan Vikas Patra was slashed to 7.8 percent from 8.7 percent; and on schemes for senior citizens to 8.6 percent from 9.3 percent.
Then earlier this month, the National Small Savings Fund (NSSF) loan rate to the Centre as well as states was lowered sharply to 8.8 percent from 9.5 percent to align the same with the previous cut in small savings interest rates.
In fact, the government was also forced to defer another unpopular step.
In February, it had disallowed a full withdrawal of contributions at one go by a member even if he or she was unemployed for two months at a stretch. It also said a subscriber would have to wait till he or she is 57 years old to be able to withdraw up to 90 percent of the accumulated fund. Earlier, the age limit was 54 years.
The first proposal was withdrawn after widespread protests, some of which had turned violent, notably in Bengaluru and Hyderabad. The other one was deferred till July 31