BENGALURU/NEW DELHI, Dec 19: Retirement fund body EPFO today slashed interest on deposits to a four-year low of 8.65 per cent this fiscal in tandem with falling rates on savings due to surge in bank deposits post demonetisation.
The Employees Provident Fund Organisation (EPFO) had provided 8.8 per cent rate of interest on deposits for 2015-16 to its four crore contributing subscribers. It maintained 8.75 per cent for 2013-14 and 2014-15 while it was 8.5 per cent in 2012-13.
“We have decided the interest rate for EPF subscribers at 8.65 per cent for 2016-17. The decision was arrived at after detailed consultations with all stakeholders. With consensus we have taken this decision,” Union Minister of State for Labour and Employment Bandaru Dattatreya told reporters here.
After the 215th meeting of EPFO’s apex decision making body, the Central Board of Trustees (CBT), the minister said: “In spite of giving 8.65 per cent interest rate, we have surplus of Rs 269 crores.”
He said that despite reduction, EPF paid the highest rate among others like Public Provident Fund (PPF), where the interest rate is 8.1 per cent; General Provident Fund (GPF), 8 per cent and post office term deposits that start from 7.10 per cent for one year.”
“The overall scenario is such that interest rates are coming down. We are giving the highest interest rate for workers. It indicates our Ministry and our Prime Minister’s commitment to protect the interest of employees,” he added.
The Finance Ministry has been reportedly asking the Labour Ministry to bring the EPF interest rate in alignment with other small saving schemes like PPF of the government.
Earlier this year, it lowered interest rate on EPF for 2015-16 to 8.7 per cent from 8.8 per cent approved by the CBT but the step was retracted after protests by trade unions.
Interest income from PF investments for 2016-17 has been estimated mainly on the basis of interest income received or receivable in this financial year, including surplus of Rs 410 crore from previous year, an official said.
“Last year, the interest rate decided was at 8.8 per cent. At that time, along with the income of EPFO, the surplus from the previous year was Rs 1,600 crore. This year, along with the income, the surplus available is Rs 410 crore,” EPFO’s Central Provident Fund Commissioner V P Joy said on the reduction in interest rate.
As the surplus has come down compared to the previous year, interest has been reduced by 0.15 percentage point compared to last year, he said, adding that “if we had declared more interest rate this year, surplus from this year for next year would have been less.”
Dattatreya also said that a decision has been taken to reduce EPFO administrative charges from 0.85 per cent at present to 0.65 per cent on total wage on which contributions are payable.
The CBT also recommended to abolish administrative charges levied in implementing the Employees Deposit Linked Insurance Scheme, 1976 passing on the benefits of efficiency and computerisation to employers, a Labour Ministry statement said.
The Central Board also decided to constitute a sub-committee of CBT with members drawn from employees and employer representatives to make a pragmatic study of employment trends for next 10 years and recommend appropriate administrative charges to the Central Board, it added.
The minister said a campaign will be undertaken to meet the twin objectives of increasing the enrolment of new workers, thereby extending social security benefits to all workers and reduce litigation.
A target of enrolling 50 lakh workers has been set for the first phase.
He said the campaign from January 1, 2017 to March 31, 2017 would focus on a large unorganised sector which constitutes 92 per cent.
According to the statement, the 8.33 per cent of the employer’s contribution proportionate to the salary of employees in excess of Rs 6,500 shall now be credited to the pension scheme along with the interest accrued in the provident fund account.
The employees, however, shall be required submit joint application along with their employer wherever the same has not been done, it said.
This will be applicable only in those cases where the members/pensioners have contributed on higher wages than the statutory wage ceiling of Rs 6,500 with or without exercise of option prior to the issue of notification for increase of wage ceiling to Rs 15,000 effective from September 1, 2014.
The minister also announced that organisational restructuring has been approved by the Union Government for implementation.
This includes cadre restructuring which will ensure career progression of 20,000 staff/officers of EPFO. The Minister said that this will be implemented as a New Year gift.
The CBT also approved a set of guidelines for streamlining process of surrender of exemption granted to establishments.
Surrender of exemption is a situation where an establishment requests to discontinue the exemption granted to it.
As the Act and Scheme is silent regarding the procedure of surrender of exemption by an establishment, the decision assumes importance in helping ease of doing business. (PTI)
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