New Delhi, March 28
The Employees Provident Fund Board today deferred a decision on lowering the current interest rate, rejecting Finance Ministry’s proposal to cut the rate by 1 per cent, while the Labour Minister, Mr Sahib Singh Verma, opposed any reduction in it from 9.5 per cent now.
“I do not want to reduce it (the EPF interest) by even 0.1 per cent,” the minister said after a meeting of the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) here.
The board, at its three-hour-long meeting, decided to defer by a month any decision to revise the interest rate on the EPF and referred the matter to the Finance and Investment Subcommittee of the Central Board of Trustees.
The panel, which will go into the investment patterns of the EPF, would submit its report within a month to the board that would examine the recommendations before taking a final decision, Mr Verma, Chairman of the CBT, he said.
“The panel will comprise two representatives each from the employers and employees groups, one or two officials and an expert,” said.
The Chief Provident Fund Commissioner, Mr Ajay Singh, said even with a 9.5 per cent interest on the EPF (when interest on Special Deposit Scheme was reduced to 9 per cent), there was a surplus of Rs 146 crore in the interest suspense account and the average yield of the EPFO investment hovered around 9.75 per cent.
This was mainly due to investment in bonds that carried a coupon rate as high as 16 per cent out of over Rs 1,40,000 crore, the EPFO had invested about Rs 1,05,000 crore in statutory funds and Rs 40,000 crore in exempt funds.
Mr Verma said the EPFO board had decided to change the investment pattern by reducing the exposure in bonds of the PSUs and public financial institutions to 30 per cent from the existing 40 per cent.
The other parameters of 25 per cent in central government securities and 15 per cent in state governments’ securities would remain the same, but investment under miscellaneous head had been
hiked to 30 per cent from 20 per cent. “At today’s meeting (of the CBT it was decided to devise an amnesty scheme for recovering Rs 2,200 crore of arrears from employers
who have defaulted on their EPF obligations,” the Labour Minister said.
Under the scheme, which would have to be, first, passed by Parliament, certain benefits and concessions, including waiver of penalties, would be given to the employers to pay their arrears, to bring them in the mainstream of compliance.
About 70 per cent of the cases of arrears are under litigation, which includes court cases and various BIFR (Board for Industrial and Financial Reconstruction) cases.
Regarding the proposed reforms, Mr Verma also said, soon, the EPFO would close about 11 lakh “marginal accounts” (that had less than Rs 100 balance each in individual accounts) and the amount would be transferred to a social security fund for the benefit of workers.
He said it would bring down the administrative cost of maintaining small accounts.
The minister said a committee had been formed to look into the details of introducing insurance cover for workers who have lost their jobs.
