EMPLOYEES PROVIDENT FUND (EPF) INTEREST RATE FIXED AT 8.5% FOR 2008-09

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MORE than 4.4 crore subscribers of the Employees Provident Fund (EPF) will receive a payout of 8.5% interest rate for fiscal 2009, the third year in a row. The Fund’s Central Board of Trustees (CBT), at a meeting decided to retain the interest rate at the same level as last year.

The decision, according to EPF officials, has virtually “cleaned out” the contingency accounts of the Fund, into which the the CBT has been dipping time and again, particularly in election years, to give a “reasonable” rate of interest. The EPF has had a higher percentage of withdrawals and retirees in 2008-09 compared to other years and the latter have already been paid out an interest rate of 8.5% for 2008-09.

This is a usual practice when the interest payout rate for the current year is yet to be declared and subscribers retire prior to the decision, unless an interim interest rate is decided on by the CBT. The decision to retain the interest rate 8.5% comes at at time when the Reserve Bank of India is expected to effect a rate cut in the wake of a marked economic downturn and the urgent need to boost consumption.

Therefore, the UPA at the Centre could now posit this as a positive move, arguing that the EPF is primarily a social security fund and a year of acute economic downturn calls for some “decisive measures”.

Flak, if any, is likely to be rejected on the contention that Employees Provident Fundrates are decided by the CBT and not the government directly. To that extent, although the finance ministry is understood to have been against the move to clean out all the reserve accounts to payout 8.5% this year, the decision is expected to work to the political advantage of the poll-bound UPA at the Centre.

The government has rejected the recommendation of a key parliamentary committee that the state’s contribution to the Employees’ Pension Scheme (EPS), 1995, be hiked substantially to at least half of the employer’s contribution, reports Our Bureau from New Delhi. The scheme is running a huge deficit, believed to be over Rs 40,000 crore, and this is the likely reason why the government rejected the demand of the Parliamentary Standing Committee on Labour.

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