Published: Thu, February 22, 2018
Business | By Max Garcia

EPFO cut may hurt employee sentiments

EPFO cut may hurt employee sentiments

Employees Provident Fund Organisation, the body regulating the Provident fund commonly known as PF, has sliced the interest rates on the Provident fund deposits.

Usually, after the EPFO decides rates, they are then ratified by the Finance Ministry.

The Employees' Provident Fund Organisation, EPFO has declared 8.55 per cent interest rate for 2017-18 for its about 5 crore members.

Labour and Employment Minister Santosh Gangwar said that at a rate of 8.55%, the EPFO will have a surplus of Rs 586 crore. Post CBT's decision, the decision will be examined by finance ministry.

The Central trade unions, which had strongly opposed to move to lower the interest rate at the meeting, is unlikely to press for any agitation as it had in the past.

"Market is so volatile that it is hard to evaluate about future. We paid 8.65% last fiscal, which had resulted in a surplus of Rs 695 crore previous year", Gangwar said.

It also took note of the EPFO participation in the disinvestment program of the government by investing in the Bharat 22 ETF to the tune of 2024.75 crore rupees. Currently, 15% of annual EPF savings are invested in equity market through exchange-traded funds (ETFs) while the rest goes to the debt market.

It said, the reduced liability on establishment can provide incentive to the employers to extend social security coverage to more employees and workers.

On the administrative charges, Gangwar said the CBT has made a decision to reduce the administrative charges from 0.65 per cent to 0.50 per cent of total wages, which are paid by employers. "This is the second such reduction since 2014-15", Congress chief spokesperson Randeep Surjewala said.

It may be noted that in December 2017, the government had cut the interest rate on small savings schemes, including the Public Provident Fund (PPF), National Savings Certificate (NSC) and KisanVikas Patra, by 0.2 percentage points for the January-March quarter.

There are also multiple new bank charges that the Modi government has levied from time to time, he added.

The rates have been coming down since 2013-14when the government made a decision to align PF interest rates with small saving schemes such as PPF. Despite this, the meeting decided by majority to lower the rate to 8.55%.

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