EPFO Interest Rate Reduction: Good News From Finance Ministry
Good news for the Employees’ Provident Fund Organisation (EPFO) subscribers as the Labour Ministry has rejected a proposal from the Finance Ministry to slash interest rate offered by the EPFO.
After the Finance Ministry reduced interest rate on General Provident Fund (GPF) and other similar funds to 7.9 per cent from 8 percent for the quarter ending September 30, the Labour Ministry was asked to review its decision to offer 8.65 per cent interest rate for 2018-19.
On two grounds, the Finance Ministry requested for the cut in EPFO interest rates. One is the EPFO’s decision to invest in financially troubled IL&FS group companies while the other was appropriation of surplus of the previous year. According to a report by Hindustan Times, the Labour Ministry said that EPFO has sufficient surplus of over Rs 3,150 crore.
It is pertinent to mention that EPFO interest rate is determined by the Central Board of Trustees (CBT) of the organisation. After assessing the annual returns on investments, the CBT decides upon the interest rates.
An official told Hindustan Times, as EPFO does not take money from the consolidated fund of the Government of India, it is not obliged to follow the instructions of the Finance Ministry.
On February 21, EPFO had raised the interest rate on funds by 10 basis points from 8.55 per cent, offered for 2017-18.
“With this kind of surplus we wanted the subscribers to get a 9 per cent interest rate. When the Centre does not contribute a penny, it has no business to regulate an independent organisation,” G Sanjeeva Reddy, president, Indian National Trade Union Congress (INTUC) and one of the CBT members told the Hindustan Times.