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EPFO might retain 8.8% interest rate for subscribers on Monday

Press Trust of India / New Delhi 14 Dec 16 | 08:07 AM

Retirement fund body EPFO is likely to take a decision on the rate of interest on PF deposits for 2016-17 fiscal in its trustees' meet on Monday.

Sources said that the interest rate could be at least 8.8 per cent which was fixed for the last fiscal.

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Besides, the EPFO will also consider a proposal to reduce the administrative charges to 0.65 per cent of total wage on which contributions are payable from 0.85 per cent at present. This will result in total annual savings of Rs 1,000 crore for around six lakh employers covered by the EPFO.

The proposal to finalise the rate of interest for 2016-17 is listed on the agenda of the meeting of the Employees' Provident Fund Organisation's (EPFO) apex decision making body, the Central Board of Trustees (CBT), headed by the Labour Minister, on December 19.

"EPFO is still working on income projections for the current fiscal and will place the proposal before the CBT on Monday," EPFO's Central Provident Fund Commissioner V P Joy told PTI.

However, sources in the Labour Ministry said that the rate of interest for the current fiscal cannot be lower than 8.8 per cent provided last fiscal because there is no decline in income of body in this financial year so far.

Earlier this year, after drawing flak from working class, the government had rolled back its decision to lower interest rate on EPF deposits to 8.7 per cent for 2015-16 and fixed it at 8.8 per cent as approved by the CBT.

There were speculations that Labour Ministry may align the EPF interest rate for the current fiscal with other small saving schemes of the government like Public Provident Fund.

Earlier in September, government had decided to reduce the interest rates on small savings schemes marginally by 0.1 per cent for the October-December quarter of 2016-17, which resulted in lower returns on PPF, Kisan Vikas Patra, Sukanya Samriddhi Account, among others.

The rate of interest on popular PPF was reduced to 8 per cent in the third quarter of the current fiscal as against 8.1 per cent in the previous three-months period.

Similarly interest rate on Kisan Vikas Patra has been brought down to 7.7 per cent from 7.8 per cent. As a result the KVP will now mature in 112 months instead of 110 months.

The trustee will also consider the proposal to abolish administrative charges on firms to fund expenditure in implementing the Employees' Deposit Linked Insurance Scheme (EDLI), 1976.

The agenda says that this could be seen as an attempt to promote the "Ease Of Doing Business in India" and to make Indian business more competitive.

It said that all administrative expenses of EDLI may be met from interest of EDLI corpus.

The administrative charges to run EDLI scheme is 0.01 per cent while inspection charges is 0.005 per cent for firms, which subscribes to insurance schemes in lieu of EDLI Scheme.

The total corpus in EDLI administration account as on March 31, 2016 is Rs 2372.83 crore. The interest generated on such a corpus would be around 17.5 crores annually.

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