PF subscribers to get 8.5% interest for 2012-13

The Employee’s Provident Fund Organisation has announced a higher interest rate of 8.5 per cent in 2012-13 compared with 8.25 per cent announced last year for over 5 crore subscribers of the Centre’s provident fund scheme.

The interest rate, approved by the Central Board of Trustees (CBT) on Monday, however, is lower than approximately 8.75 per cent return that the fund earned this year.

“The lower interest payout will help the Government to completely wipe out the deficit in the interest account of the EPFO due to erroneous surplus calculation and higher interest disbursement in 2010-11,” a Government Official toldBusiness Line.

The CBT’s decision will now be notified by the Finance Ministry.

Trade union leaders, who are also part of the CBT which comprises representatives from the Government, employers’ union and employees’ union, are disappointed with the interest rate announcement and argue that there was possibility to give more.

“There is some surplus money in non-operating accounts. The interest amount that the Government will save on these accounts that do not earn interest could have been distributed to subscribers,” a trade union representative said.

EPFO officials maintain that it would have been difficult to announce higher returns as it was important to neutralise the deficit in accounts.

The Government had announced a 9.5 per cent interest rate in 2010-11, which was a whole percentage point higher than returns earned by the fund, as it decided to distribute around Rs 1,700 crore of surplus it discovered in its account.

The EPFO later found that the surplus was much smaller than originally calculated as much of it was parked in inactive accounts of the fund that could get activated any time.

Last year, the EPFO had funded part of the over Rs 500 crore deficit by announcing a 0.25 per cent lower return on the funds.

“The remaining deficit of about Rs 350 crore will be wiped out this year and we expect to have a small surplus,” the official said.