Kharge: Sticking to convention

New Delhi, July 4: Over 4.5 crore subscribers will get an 8.5 per cent return on their provident fund deposits for 2009-10 at a time when banks are lowering deposit rates across the board.

Two days before the Union budget, the Employees’ Provident Fund Organisation (EPFO) today decided to retain the interest rate at 8.5 per cent for the fifth consecutive year.

The decision to retain the interest rate was taken by the Central Board of Trustees (CBT), the policy-making body of the EPFO.

Labour minister M. Mallikarjun Kharge chaired the meeting of the CBT and the decision would now go to the finance ministry for ratification.

The payment of an 8.5 per cent interest rate on provident fund deposits, which are of the order of Rs 1.82 lakh crore, is expected to leave a surplus of Rs 6.4 crore during the current fiscal.

The status quo on PF rates was on expected lines as the payment of a higher amount would have resulted in a deficit in the EPFO’s account.

Stock play

The EPFO board today deferred a decision on investing 15 per cent of its corpus in the capital market.

If agreed, it would have resulted in about Rs 25,000 crore — 15 per cent of the Rs 1.82 lakh crore — flowing into stocks.

“We would separately look into it (investing funds in stock markets),” Kharge told reporters after the CBT meeting.

“While returns (on PF deposits) are important for employees, safety and security are vital,” the minister said.

The issue, he said, would be taken up in the next meeting of the CBT.

“A large number of members in today’s meeting were not in favour of the idea of investing 15 per cent of funds in stock markets as proposed by the finance ministry,” A. D. Nagpal, a CBT member and secretary of the Hind Mazdoor Sabha, said.

“Our priority is security of depositors’ money. We want good returns on the investments but not at the cost of security of the retirement money of subscribers,” he added.

Labour secretary Sudha Pillai said, “They were concerned with security of the funds. We also want security of funds. We have to see how we can improve or maximise returns keeping the safety of funds intact.”