Modi govt revises EPF interest rate again; hikes it to 8.8%
This is the third rollback on EPF. Last month the government was forced to withdraw the Budget proposal to tax a certain portion of withdrawals.
New Delhi: Bowing to employee protests for the third time in two months, the government on Friday rolled back its decision of lower interest rate on provident fund deposits to 8.7 percent for 2015-16 and agreed to fix it at 8.8 percent as decided by retirement fund body EPFO.
The roll back comes on the heels of government having to withdraw an order restricting withdrawals of employers share in the employee provident fund (EPF) till an employee achieves 58 years of age. Last month, the government had to roll back a Budget proposal to tax EPF withdrawals.
The rollbacks on both the decisions followed protests from employees and their unions.
"I am happy that our Finance Minister has agreed for 8.8 percent interest to be given for EPF workers for 2015-16. We will issue a notification of 8.8 percent interest rate immediately," Labour Minister Bandaru Dattatreya told reporters.
The minister clarified that the EPFO's apex decision making body the Central Board of Trustees headed by him, in its meeting held on February 16, 2016 at Chennai, recommended 8.8 percent interest to be credited to EPF workers for the 2015-16 which would leave a surplus of Rs 673.85 crore.
The minister said that the Finance Ministry had sought clarification on interest to be credited to inoperative accounts and it was clarified that interest of 8.8 percent was (decided) after taking into consideration the inoperative accounts also.
He also informed that EPFO updates about 15 crore accounts annually and only 2.89 lakh accounts have to be updated as of March 18, 2016.
When asked about the tussle with Finance Ministry, the minister said, "Finance Ministry advises all the ministries. When interest rates were falling they wrote a letter to us and we fixed the interest keeping that in view."
The roll back comes in the backdrop of a nationwide protest by 10 central trade unions opposing the Finance Ministry's decision to lower EPF interest rate by 10 basis points. RSS-backed Bharatiya Mazdoor Sangh had already called a protest on Wednesday.