New Delhi: Retirement fund manager EPFO's key advisory body Finance and Investment Committee (FIC) has recommended 8.5 percent interest on provident fund (PF) deposits for 2010-11, the same return given to subscribers for the past five years.
FIC, at its meeting on Friday took a decision on interest rate for the coming fiscal, which will now be placed before the Central Board of Trustees (CBT), Employees Provident Fund Organisation's (EPFO) apex body, for final approval.
The FIC recommendations that would have impact on 4.71 crore depositors, are usually accepted by the CBT.
"The FIC has firmed up its view to maintain 8.5 percent interest rate on deposits for 2010-11, despite opposition from trade union representatives. The decision would leave a surplus of Rs 15.26 crore," an EPFO source said.
"Since increasing rate to 8.75 per cent for next fiscal would result in a huge deficit of Rs 426.53 crore, the FIC decided to pay 8.5 percent for the sixth year in a row," he said.
The employees' representatives, including Hind Mazdoor Sabha (HMS) secretary AD Nagpal and Bharatiya Mazdoor Sabha (BMS) secretary B N Rai objected to the 8.5 percent rate arguing that rate of return is decided after taking into account conservative income estimates.
"The employees' representatives asked to place a statement showing last five years' actual and projected income of EPFO's huge corpus of Rs 2.57 lakh crore," he added.
The unionists have been demanding an interest of 9.5 percent for 2010-11. EPFO with a subscriber base of over 4.7 crore has been maintaining the return of 8.5 percent on deposits since 2005-06.
EPFO has estimated an income of Rs 15,036 crore in 2010-11 and maintaining 8.5 percent interest rate in next fiscal means interest payout of Rs 15,020.80 crore and a surplus of Rs 15.26 crore. Maintaining nine percent return would result in a deficit of over Rs 868 crore.
The retirement fund manager maintained an interest rate of 9.5 percent for three consecutive financial years, during 2002-05. Prior to that EPFO provided a return of 11.25 percent for 2001-02.
EPFO maintained a highest rate of return of 12 percent for more than a decade during 1989-90 to 1999-2000. Interestingly, when EPFO started operations, it gave a return of just 3 percent in 1953-54.
PTI
First Published: Sunday, February 28, 2010, 11:05