Tag: employees provident fund organisation

EPFO meet to discuss hike in minimum pension

Banking & Finance

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At the next meeting of the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) scheduled later this month, increasing the minimum pension for the subscribers of the pension fund is the key agenda.

While the Central Trade Unions have demanded a hike of up to ₹6,000 from the current ₹1,000, the CBT may take it up to ₹3,000. The controversial issue of investing the EPFO money in private corporate bonds may also come up in the meeting. The CBT may also discuss the issue of the interest rate for the fund for 2021-22.

‘Against pensioners’

“We expect that the CBT may decide to increase it to ₹3,000,” a CBT member told BusinessLine. The Labour Standing Committee had recently recommended the Centre to increase the minimum pension to ₹3,000. However, a trade union representative said they do not expect much progress on this. “The Centre has been delaying the decision. The attitude of the Centre is against giving anything to pensioners and workers,” the TU leader said.

There are indications that the present interest rate of 8.5 per cent will continue for the money deposited in the EPF. “We were having an interest rate of 12 per cent earlier. We have been asking the Centre to restore it. But they brought it down to 8.5 per cent,” a Trade Union representative in CBT said.

A source in the Labour Ministry, however, said that there may not be any change in the current interest rate. The EPFO and the Finance Ministry have been urging the CBT to permit investment of money in the EPFO in various infrastructure bonds. At the moment, the money is invested in the exchange-traded funds (ETF) of the PSUs.

“The Centre was seeking permission to invest the money in private corporate bonds. It wants the CBT to look at the possibility of such investments on a case-to-case basis,” a member said. The CBT is likely to discuss the Centre’s request for removing the restriction on investing in private sector bonds. The agenda may also include permitting the Financial Investment Committee to invest in private bonds approved by the Finance Ministry. The meeting was scheduled to take place on November 16. But it has been postponed.

“The final agenda is not ready yet. We will hold a meeting in November itself,” a Labour Ministry official said. The last meeting of the CBT was held in Srinagar in March. The CBT recommended an 8.5 per cent annual rate of interest to be credited on EPF accumulations in members’ accounts for 2020-21. The Finance Ministry approved the proposal recently.

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Finance ministry approves 8.5% return on PF deposits for FY21, BFSI News, ET BFSI

Personal Finance

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The finance ministry has given its go ahead to 8.5% rate of interest on provident fund deposit for 2020-21 paving way for the Employees’ Provident Fund Organisation to credit the interest in accounts of over 60 million beneficiaries.

The move is expected to bring some cheer a week ahead of Diwali. Labour secretary Sunil Barthwal confirmed the development to ET. “Approval was received from the finance ministry today. It will be notified as soon as possible,” he said.

The labour ministry has to notify the interest rate for the year before EPFO starts crediting it into the beneficiary account.

The move is expected to leave EPFO with a surplus of Rs 300 crore compared to the preceding financial year when it had a surplus of Rs 1000 crore.

The central board of trustees of EPFO, headed by the labour minister, had in March this year approved the interest rate of 8.5% for 2020-21, same as the previous year. However, the labour ministry has to mandatorily seek approval from the finance ministry on the proposed rate. The process was fast tracked after top officials of the labour ministry met finance ministry officials earlier this month to address their queries and asked them to expedite the process.

The finance ministry has over the past few years questioned the higher rate of interest declared by EPFO year after year when the rate of interest for other government schemes including public provident fund or small saving schemes was much lower.

EPFO had pegged an income of around Rs 70,300 crore in the previous fiscal including around Rs 4,000 crore from selling a portion of its equity investments and Rs 65,000 crore from debt.

Based on this, its central board of trustees, headed by the labour minister, had recommended the interest rate of 8.5% for FY21. EPFO had retained the interest rate on PF deposits for 2020-21 same as 2019-20 despite the huge amount of Covid withdrawals from the retirement fund kitty since the scheme was announced last year.

EPFO has an active subscriber base of more than 60 million and every year it invests 15% of its annual accruals in equity and rest in debt instruments. However, since the outbreak of Covid millions of salaried class workers have lost jobs or have been working on reduced wages prompting them to withdraw from their retirement fund kitty under the Covid withdrawal scheme.



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