The finance ministry on Thursday approved a recommendation of the Employees’ Provident Fund Organisation (EPFO) which had lowered the interest rate on employees provident fund to 8.55% for its more than 6 crore subscribers for 2017-18, a five-year-low, from 8.65% in the previous fiscal.
“The finance ministry has approved the interest rates according to the decision taken by EPFO's central board of trustees. However, they have also given us some suggestions informally,” Business Standard quoted a senior labour ministry official as saying.
“It is difficult to evaluate about future in view of present economic scenario. We paid 8.65% last fiscal, which left a surplus of Rs 695 crore. This year, we have decided to recommend 8.55% for 2017-18, which will leave a surplus of Rs 586 crore,” labour minister Santosh Gangwar told reporter after the Employees’ Provident Fund Organisation’s (EPFO) trustees meeting on February 21.
The newspaper added that the finance ministry's approval came more than a month after it wrote to the labour ministry raising a few questions over the EPFO trustees’ decision to give 8.55% interest rate in 2017-18.
Earlier it had reported that the finance ministry had written a letter to the labour ministry on March 15, asking why the EPFO has not kept a higher surplus while declaring the rate at 8.55%. This was the third consecutive year when the finance ministry has asked the labour ministry to keep a higher surplus while deciding the rate of interest for EPFO subscribers.
Gangwar, however told news agency PTI that there is no disagreement with the finance ministry on providing 8.55% rate of interest.
“It is not that they have rejected our proposal (of 8.55% rate of interest on EPF deposits for 2017-18). They can give suggestion on our proposal, “ Gangwar said.
“The proposed rate of interest will be ratified by May or June as per convention. There is no disagreement on the proposed interest rate. Had there been any disagreement, we would have got their view by now,” he added.
Gangwar also said the EPFO has liquidated portion of its investments in the exchange traded funds (ETFs) to bridge the gap to provide 8.55% interest this fiscal.
He said the EPFO received 8% returns on its bond investments but it is able to pay 8.55% rate because it has sold some of its investments in ETFs.
Gangwar also assured that the required amendment in the Employees’ Provident Fund & Miscellaneous Provisions Act would be done to implement the decision to reduce employees threshold.
(With PTI inputs)