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PF tempers hike to stay in safe zone

New Delhi, Feb. 25: Subscribers to the Employees’ Provident Fund Organisation (EPFO) will get an 8.5 per cent annual interest on their deposits for 2012-13, marginally higher than the 8.25 per cent given last year.

The interest rate, approved by a central board of trustees today, is higher than that announced in 2011-12 but lower than the approximately 8.75 per cent returns that the fund earned this year. The fund has around 5 crore subscribers.

“A decision has been taken to pay 8.5 per cent interest on PF deposits... but we have expressed our reservations as we wanted a higher interest rate,” D.L. Sachdev, the secretary All India Trade Union Congress (Aituc), said after the board of trustees met.

Savings bank deposits usually fetch returns ranging from 4 per cent to 7 per cent.

According to official estimates, a rate of interest of 8.6 per cent will throw up a shortage of Rs 240.49 crore while the 8.5 per cent will leave a surplus of Rs 4.13 crore.

“The lower interest payout will help the government wipe out the deficit in the interest account of the EPFO on account of erroneous surplus calculation and higher interest disbursement in 2010-11,” an official said.

The trustees’ decision will have to be notified by the finance ministry to come into effect.

In 2010-11, the government had announced an interest rate of 9.5 per cent — one percentage point higher than the returns earned by the fund — as it decided to disburse a surplus of around Rs 1,700 crore discovered in its account.

The EPFO later found that the surplus was lower than originally calculated as much of it was parked in inactive accounts that can get reactivated any time.

Last year, the EPFO had funded part of the over Rs 500- crore deficit by announcing a 0.25 per cent lower return. “The remaining deficit of about Rs 350 crore will be wiped out this year and we expect to have a small surplus,” the official said.