Fernandes: New decision
New Delhi, Jan. 13: Retirement fund body EPFO today hiked the interest rate on provident fund deposits by 0.25 per cent to 8.75 per cent for 2013-14, benefiting over five crore subscribers.
The marginal increase in interest rate from 8.50 per cent in the last fiscal will leave the EPFO with a surplus of Rs 43.14 crore. EPFO has a corpus of around Rs 5 lakh crore.
“We have decided to recommend to the government an 8.75 per cent rate of interest for 2013-14 to its subscribers,” labour minister Oscar Fernandes, who chaired the CBT meeting, said.
The decision to raise the interest rate was taken by the Central Board of Trustees (CBT), the apex decision making body of the Employees’ Provident Fund Organisation (EPFO).
The EPFO’s recommendations will now be vetted by the finance ministry. Once the ministry gives its approval, the interest will be credited into the accounts of subscribers.
“We have estimated an income of Rs 25,048.55 crore for 2013-14. The EPFO will require 25,005.41 crore for providing 8.75 per cent rate of interest for this fiscal and leave a surplus of Rs 43.14 crore,” EPFO’s Central Provident Fund commissioner K.K. Jalan said.
When asked about the EPFO’s plans to improve the returns on its investments, particularly of the special depositor scheme (SDS) which earns just 8 per cent, Jalan said: “We will definitely take out money from SDS and invest it in high yielding instruments. We will soon work on a proposal.”
The board also reviewed the performance of its four pension fund managers since August 2011.
The State Bank of India remained on the top by earning a return of 9.23 per cent on investments, followed by Reliance Capital Asset Management at 9.19 per cent.
The two other fund managers — HSBC AML and ICICI Sec PD Ltd — earned 9.18 per cent each which was above the benchmark rate of 9.11 per cent.
The CBT also initiated the process for selection of new fund managers and set up a committee to appoint a consultant for the purpose. At present, Crisil provides consultancy services to the EPFO.
The trustees also asked the finance, investment and audit committees to look into the proposal that sought more freedom for the EPFO to trade and exit investments, besides allowing it to stop investing in the bonds of state governments.