The financial, investment and audit committee of the EPFO board had proposed 8.95 per cent rate of return as “feasible” in its meeting held in January 2016.
The central board of trustees of the Employees’ Provident Fund Organisation (EPFO) on Tuesday recommended 8.80 per cent rate of return on retirement savings under its watch for 2015-16.
Although this is a notch higher than the 8.75 per cent offered by the EPFO to its subscribers at present, the announcement has left the trade unions disappointed as they complain that the financial and investment panel of the EPFO board had earlier recommended interest rate of 8.95 per cent.
“We have strongly protested the move to declare rate of interest at 8.80 per cent in the CBT meeting today. At 8.95 per cent, the rate declared by the financial and investment panel of the EPFO, it is left with a surplus of 91 crore. We have not agreed to it,” said Prabhakar Banasure, a member of financial, investment and audit committee of the EPFO who was present in the meeting held in Chennai.
Mr. Banasure said Union Labour Minister Bandaru Dattatreya, who chaired the Central Borad of Trustees meeting, said 8.80 per cent is an “interim” interest rate. “We demanded the Minister to wait for the audit of the 2015-16 balance sheet before declaring the interest rates. However, he didn’t agree,” he added.
The FIAC of the EPFO board had proposed 8.95 per cent rate of return as “feasible” in its meeting held last month.
The EPFO has estimated Rs. 34,844 crore as its income meant for distribution of interest to its 8.7 crore subscribers for 2015-16. This includes a surplus of Rs. 1,604 crore which accrued in 2015 to the EPFO’s income beyond the fund’s original estimates.
The FIAC had discussed that with increase in the interest rate to 8.95 per cent, the surplus available with the retirement body would come out to be Rs. 91.40 crore. At 8.80 per cent and 8.85 per cent, the surplus would be Rs. 673.85 crore and Rs. 479.70 crore, respectively, the FIAC had said.
Earlier, the labour ministry had proposed 8.90 per cent as rate of interest to the union labour ministry for taking in-principle approval of the finance ministry. However, sources said the finance ministry, which is looking to moderate the returns on small savings instruments, wanted the EPFO’s returns to fall in line.