PF Interest Rate Retained at 8.75 Per Cent for 2014-15
The Employees’ Provident Fund Organisation (EPFO) on Tuesday announced a rate of interest of 8.75 per cent on provident fund deposits for the current fiscal year (2014-15), a move which would benefit its over five crore subscribers across the country.
The decision to retain the interest rate at 8.75 per cent was taken at a meeting of the Central Board of Trustees – the apex decision making body of EPFO – chaired by Labour Minister Narendra Singh Tomar in Delhi.
“EPFO will provide 8.75 per cent rate of interest on PF deposits for 2014-15,” Mr Tomar told reporters after the meeting.
As per practice, the decision by retirement fund body EPFO’s trustees would be implemented after the concurrence of the Finance Ministry.
“The benefit under the Employees’ Deposit Linked Insurance (EDLI) Scheme would be increased to a maximum sum assured of Rs. 3.6 lakh from existing Rs. 1.56 lakh,” said K K Jalan, EPFO’s Central Provident Fund Commissioner.
The sum assured under EDLI is provided in proportion to monthly wage ceiling which is Rs. 6,500 at present. It would be enhanced to Rs. 15,000 per month soon.
Senior Labour Ministry officials present in the meeting apprised the board that the notification regarding enhancement of wage ceiling has been sent to press after Law Ministry’s clearance and will be reality soon.
They also said that the notification providing minimum monthly pension entitlement of Rs. 1,000 under the Employees’ Pension Scheme run by EPFO will also be notified simultaneously. After notification, around 28 lakh pensioners getting less than Rs. 1,000 per month would immediately benefit.
At present, all those employees with basic wages of up to Rs. 6,500 per month at the time of joining can become members of EPFO schemes. Now with increase in wage ceiling around 50 lakh more workers are expected to come under the ambit of EPFO.
The minister also revealed that the board has decided to appoint credit rating agency CRISIL as consultant for the third time to engage new fund managers and evaluate their performance for three-year term beginning April 1, 2015.
After Crisil is appointed as consultant, it would take at least three months to appoint fund managers for EPFO.
According to an official statement, the proposed pattern of investment by Finance Ministry was discussed by the CBT during the meeting and the board was not in favour of investing in equities and exchange traded funds (ETFs).
It was decided to recommend for making the pattern more flexible to further increase the percentage of investment in government securities.
The board also discussed the feasibility of deployment of funds in AAA rated Central/state public sector undertakings. Without giving details about specific proposals, the Labour Minister said that board decided to set up a PSU cell within its Investment Monitoring Cell (IMC) to negotiate with primary issuers (of bonds) on behalf of all fund managers.
State-run NTPC has made a proposal seeking an EPFO investment of Rs. 10,000 crore in its secured non-convertible bonds under a long term agreement from 2014-15.
The trustees also decided to go in for short term (not exceeding 15 days) borrowing of funds for participation in primary auction of securities.
This move is expected to result in EPFO getting to invest in securities at more profitable rates. The funds would be borrowed by means of CBLO, corporate term repo and other such instruments for participation in primary auction of government securities and corporate bonds.
The board decided to constitute a sub-committee for construction and contract workers. The committee shall examine the various issues regarding the coverage of employees engaged in this sector and shall recommend strategies to widen the coverage and enrollment in this area.
The board was told that SBI has reduced its service charges for collecting PF contribution to Rs. 1.80 per Rs. 1,000 for net based transaction and Rs. 2.40 per Rs. 1,000 for physical transaction form the existing uniform rate of Rs. 3.
It is expected that this reduction in rates shall result in substantial savings to the tune of around Rs. 100 crore per annum for the retirement fund body.