The move would cost an additional Rs.1,700 crore to EPFO
Over 4.4 crore workers and employees of the public and private sectors in the country will receive an interest rate of 9.5 per cent instead of 8.5 per cent for 2010-11 for their savings in the Provident Fund account.
The move to increase the interest rate by one percentage point was taken at a meeting of the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) held here on Wednesday.
The move to increase the interest rate by one percentage point, after five years, would cost the EPFO an additional Rs.1,700 crore and that would be met from the surplus of Rs.1,731 crore available in the interest suspense account, said Labour and Employment Minister Mallikarjun Kharge after the CBT meeting.
Talking to The Hindu, he said the calculation on the interest suspense account had been made since 1952 and now, after the hike in the interest rate, the account would be left with Rs.31 crore.
Mr. Kharge, who is also the Chairman of the CBT, said the decision would be forwarded to the Finance Ministry for its formal approval.
He pointed out that during the earlier years, despite recession and global meltdown, the EPFO paid 8.5 per cent interest to the subscribers.
Asked whether the decision was unanimous, he said though some representatives of the employers suggested that the increased — one percentage point — rate could be given to the employees separately instead of clubbing it with the 8.5 per cent, finally they accepted the decision.
The Board decided not to give interest from April 1, 2011, on PF accounts that remained “inoperative” for three years. Similarly, it turned down the Finance Ministry's proposal to invest a portion of Provident Fund money in the stock market.Instead the CBT decided to continue the existing investment pattern – ie. on bonds and securities floated by the Central and State governments and public financial institutions.