About 9 crore employees’ provident fund accounts, lying inoperative due to lack of contributions for three consecutive years, will not get any interest for the last five years as the Centre’s decision to rollback a 2011 rule relating to interest on these inoperative accounts set stiff preconditions.
These EPF accounts, which hold Rs.44,000 crore worth of savings in them, will prospectively be credited with interest only if the concerned employee approaches the PF office to transfer or close such accounts.
“The interest on inoperative accounts will be credited only when somebody comes to us for either transferring or closing the account,” Central Provident Fund Commissioner V. P. Joy told The Hindu . “Only a particular class of inoperative account holders, such as those who apply for transfer or closure, will be eligible and the other classes will remain inoperative only.”
Centre’s notification
According to a November 11 notification issued by the Union Labour Ministry, a person’s EPF account will continue to earn interest till she turns 58 years of age. While the directive reverses a decision taken by the Unprevious government in 2011 — to suspend interest credits on inoperative EPF accounts — the notification comes into effect only from November 11, 2016.
“This means there will be no interest credit in the inoperative EPF accounts for the last five years since 2011 and in this financial year, till November 11,” said Prasanna Deokar, Vice President at India Life Capital, an investment advisory firm.
Out of the total 15 crore EPF accounts, 9.23 crore are inoperative with about Rs.44,000 crore deposits in them.
The EPFO has been earning money from the funds in these inoperative accounts. While it has paid an interest rate of between 8.25 to 8.8 per cent since 2011-12 to its active members, Mr. Joy said no decision had been taken on utilising the interest amount earned by the EPFO on the funds from inoperative accounts over the past five years.
Lacking details
Mr. Joy said the EPF office doesn’t have “crucial details” such as date of birth of many account holders.
“So, till we are able to figure out who is eligible, we will not be able to credit interest on all inoperative accounts,” he said, adding that the process of crediting interest on an inoperative account will only begin once a member approaches the PF department.
The decision to credit interest in inoperative EPF accounts was first announced by Labour Minister Bandaru Dattatreya in March.
However, according to the notification, inoperative EPF accounts of employees who settle abroad permanently and fail to withdraw their account balance within 36 months will not accrue any interest.
“The Labour Minister is clearly going back on his words,” All India Trade Union Congress Secretary D.L. Sachdev said. “He had promised crediting interest on all inoperative accounts. The interest accrued on unclaimed EPF money since last five years has not been utilised for any purpose.”
Mr. Sachdev said that the EPFO had invested the money of inoperative account members since 2011 to earn interest and it should be credited back to the workers.
“We have taken a pro-worker decision…We have now decided to credit interest even to inoperative accounts,” Mr. Dattatreya had said after taking the decision in the EPFO’s central board of trustees meeting chaired by him in March.
