The Employees Provident Fund Board, which met in New Delhi on Wednesday, has decided to slash the interest rate on deposits to the EPF to 8.5 per cent from 9.5 per cent for the year 2005-06.
This was decided at a four-hour meeting of the Central Board of Trustees of EPF chaired by Labour Minister K Chandrashekhar Rao.
"There will be an additional requirement of about Rs 370 crore (Rs 3.70 billion), but there would be no burden on governmentexchequer. The burden would be on labour ministry to find the additional resources," he said.
The Central Board of Trustees of the country's biggest Employees Provident Fund Organisation, had earlier met on November 21 by failed to fix the rate of returns and had postponed the meeting.
There are 4 crore (40 million) subscribers to the EPF scheme.
The Leftist trade unions had been demanding the prime minister's intervention so that the interest rate is ertaiend at 9.5 per cent. The unions had also demanded that interest on Special Deposit Scheme and government bonds should be raised to enable EPFO retain the interest rate at 9.5 per cent for 2005-06.
However, the finance and investment sub-committee of the EPFO had already recommended that interest rate should be cut to 8 per cent rate for this fiscal. The reduction in EPF rate was suggested as EPFO ended up with a deficit of Rs 716 crore (Rs 7.16 billion) in 2004-05 by offering a high 9.5 per cent interest.
The deficit was met through the reserve fund, which is now left with a corpus of Rs 250 crore (Rs 2.5 billion).
If the EPF interest rate had been 8.5 per cent last fiscal, the fund could have avoided a deficit. EPFO had a corpus of Rs 72,000 crore (Rs 720 billion) till March 2004, which grew to Rs 79,000 crore (Rs 790 billion) by March 2005.
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