The Hindu : New Govt. to decide on PF interest rate

Online edition of India's National Newspaper
Wednesday, Mar 10, 2004

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Business

New Govt. to decide on PF interest rate

By Our Special Correspondent

NEW DELHI, MARCH 9. A final decision on the rate at which interest will be paid to over 3.2 crore subscribers of the employees provident fund next fiscal will be made only after the installation of the new Government following conclusion of the forthcoming Lok Sabha elections in May.

According to official sources, it is difficult to say whether the current interest rate of 9.5 per would be continued. The Central Board of Trustees of Employees Provident Fund Organisation is supposed to take a view in the matter and make recommendations to the Government for a final decision. As the Lok Sabha stands dissolved and poll schedule announced, a decision would have to a wait for the new Government. Even the board of trustees has not yet considered the issue and taken any view.

The Central Board of Trustees had cut interest on PF by 0.5 per cent but granted a golden jubilee bonanza of 0.5 per cent to virtually maintain 9.5 per cent for the current fiscal. Incidentally the Union Labour Minister heads the board. It may be recalled that the Union Finance Ministry has insisted on 0.5 per cent cut in interest rate although the Labour Ministry had resisted it. The grant of bonanza had resulted in the maintenance of the interest level at the current level. There are said to be two views on the interest rates with one school of thought believing if the Centre could introduce higher return bearing instruments such as Varishta Pension Bima Yojana and Dada-dadi bonds, then the market certainly would have an `appetite' for it. The other group comprising mainly experts on the financial markets feels the sustainability of higher returns for the EPFO was `untenable' due to low interest regime.

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