New DelhiI, April 12
Union Labour Minister Sharad Yadav today turned down the Finance Ministry’s proposal to slash interest rate on Employees Provident Fund and decided to continue the existing rate of 9.5 per cent for an interim period.

The matter will be discussed in the Union Cabinet and it will be left to the Government to take a decision on the interest rate, Mr Yadav said.

A special meeting of the Central Board of Trustees of the EPF chaired by the Minister decided by consensus to keep the EPF rate at 9.5 per cent and not reduce it as proposed by the Finance Ministry.

The Finance Ministry’s proposal was made on the basis of the fact that 80 per cent of the EPF corpus amounting to about Rs 48,000 crore stands invested in the special deposit scheme (SDS) of the Government of India. The Central Government has reduced the rate of interest on the SDS to 9 per cent from April 1, 2002. The interest rate on SDS is the major factor influencing the declaration of the rate of interest on the EPF.

Mr Yadav told newspersons after the meeting that the EPF would still have a surplus of Rs 115 crore if it continued with the existing 9.5 per cent rate. Otherwise, the surplus of the fund would be Rs 411 crore at 9 per cent interest rate, he added.

Although the Finance Ministry had proposed a 0.5 per cent cut in the EPF rate in line with small savings and general provident fund rates, Mr Yadav said: “We will take up the matter with the government”.

He said the matter would be taken up at the Cabinet soon and it was for the government to take a decision.

Mr Yadav maintained that even after a cut in the interest rate on special deposit scheme (SDS), where EPF has about 80 per cent investment, the fund for 26 million workers could generate a surplus.

The total corpus managed by the Central Board of Trustees stood at Rs 1,02,163 crore last fiscal, of which the provident fund amounted to Rs 59,988.42 crore and pension fund contributed Rs 39,049.82 crore.

Of the Rs 59,988 crore EPF corpus, the trust invested 80 per cent (Rs 48,000 crore) in the SDS and the remaining in central and state government papers and PSU bonds.

The Central Board of Trustees had earlier asked the Reserve Bank of India to take over the total investments of the fund and give an inflation indexed return of 6.0 per cent.