EPFO trustees to decide interest rate on Sept 15

Retirement fund manager EPFO`s trustee would decide on September 15 the rate of interest on deposits for its over 4.71 crore subscribers for 2010-11 fiscal.

New Delhi: Retirement fund manager EPFO`s trustee would decide on September 15 the rate of interest on deposits for its over 4.71 crore subscribers for 2010-11 fiscal.

"The trustees` meeting on September 10 has been rescheduled to September 15. The rate of return for its subscribers is listed on the agenda of the meet," a source said.

Earlier the Employees` Provident Fund Organisation`s (EPFO) apex decision making body Central Board of Trustees` (CBT) was scheduled to meet on September 10 to decide rate of return which is most likely to be 8.5 percent as it would leave a surplus of about Rs 15.26 crore with it.

It is for the second time that the meeting of the trustee has been rescheduled as earlier it was slated for September 4.

For the sixth year in a row, EPFO subscribers are likely to get 8.5 percent interest on their deposits in the current fiscal. The organisation has been giving 8.5 percent rate of return to the subscribers since 2005-06.

In April, the EPFO trustees had deferred a decision on rate of return for its subscribers for current fiscal.

Some trustees had reservations against fixing interest rate on the basis of income and interest payout projections for current fiscal by EPFO official. They had demanded a comparative analysis of what was projected and the actual interest payout and liabilities in the past years.

The analysis indicated that in the past three financial years, the actual deficit remained higher than the projected.

EPFO invests in central and state government securities as well as in public sector undertakings and financial institutions.

In 2009-10, EPFO projected that there would a surplus of Rs 6.4 crore on maintaining 8.5 percent interest rate. But it turned out to be a deficit of Rs 291.08 crore.

Similarly, for 2008-09, a deficit of Rs 139.25 crore was estimated for maintaining interest rate at 8.5 percent which amounted to Rs 157.62 crore. In 2007-08, for providing at return of 8.5 percent, the estimated shortfall was Rs 263.78 which again went up to Rs 499.45 after interest payouts.

The employees` representatives demanded at the last meeting that the rate of return on provident fund deposits be raised to 9.5-10.5 percent from 8.5 percent.

The EPFO`s key advisory body, the Finance and Investment Committee (FIC), had recommended 8.5 percent interest rate for 2010-11 at a meeting held on February 26 this year.

The FIC recommendations are usually accepted by the CBT. The committee had said that maintaining 8.5 percent interest rate would leave a surplus of Rs 15.26 crore. The EPFO has estimated an income of Rs 15,036 crore in 2010-11.

FIC had also indicated that increasing the rate to 8.75 percent for the next fiscal would result in a huge deficit of Rs 426.53 crore and 9 percent return would result in a deficit of over Rs 868 crore.

The retirement fund manager had maintained an interest rate of 9.5 percent for three consecutive financial years between 2002 and 2005.


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