EPF rate cut to 8.25%, fiscal hope floats

Two days, two signs of willingness to take the bull by the horns.
Shape of things to come in the Union budget today?

After hiking passenger fares for the first time in nine years and braving opposition from unions, the government on Thursday set the tone for lower systemic interest rates by slashing those paid on Employees’ Provident Fund (EPF) deposits to 8.25% for the current fiscal.

That’s a drop of 125 basis points (bps), or 1.25 percentage points, from the 9.5% interest rate enjoyed by the 4.7 crore-odd EPF subscribers in 2010-11.

‘’The ministry of labour and employment has conveyed the approval of the central government to credit interest at 8.25% for 2011-12. You are requested to issue necessary instructions to all concerned,’’ the Employees Provident Fund Organisation (EPFO) directed its field offices in a circular.

EPFO had referred the issue of a rate cut to the finance ministry after its Central Board of Trustees failed to take a decision.

It had suggested three different rates, ranging from 8.25% to 9.5%, pointing out that it would have a deficit of Rs24 lakh against its earnings at a rate of 8.25%, which would swell to Rs526.44 crore at 8.5%.