Over 50 million subscribers of the retirement fund body Employees Provident Fund Organisation (EPFO) may get 8.5 per cent return on their investments during 2012-13, 0.25 per cent higher than last fiscal.

“The EPFO has worked out 8.5 per cent rate of return for the current fiscal. It will not leave any deficit. However, the proposal has not been finalised as yet,” sources said.

The EPFO had paid 9.5 per cent interest in 2010-11, before scaling it down to 8.25 per cent in 2011-12 fiscal.

Although EPFO announces interest rate at the beginning of the year, there has been a delay this time. Trade unions have been pressing for an early meeting of the Central Board of Trustees (CBT) to decide on the interest rate for the current fiscal.

Plans to ease investment norms

EPFO is also planning to relax investment norms so that a part of its corpus can be invested in bonds of private sector companies to ensure better returns for its over 50 million subscribers.

It has proposed to reduce the maximum tenure of investment in non-banking private sector companies from 15 years to 10 years.

It has also suggested that the condition under which fund can be invested in companies with minimum 26 per cent government holding, should be removed.

Under the existing guidelines, EPFO can invest in only seven private sector companies and banks which meet the criteria — HDFC Ltd, IDFC Ltd, IL&FS Ltd, LIC Housing Finance, HDFC Bank, ICICI Bank and Axis Bank.

The note further said that these companies find it cheaper to raise funds from overseas markets through external commercial borrowings and do not regularly tap the domestic sources.

On the other hand, the corpus of EPFO keeps on growing at annual rate of almost 16 per cent. Since the new investment pattern was introduced, the corpus has grown from Rs 1.14 lakh crore in 2003 to over Rs 4 lakh crore as on March 2012, the note added.

EPFO will place both the proposals, interest rate as well as investment norms, before its advisory body Finance and Investment Committee (FIC) at its meeting on February 14. Once approved by the FIC, it will go to Labour Minister-headed CBT for final approval on February 15.

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