The decision has to be formally ratified by Finance Ministry.
Ahead of general elections, retirement fund body EPFO Thursday raised the interest rate on EPF to 8.65 per cent for 2018-19, the first increase in three years.
The interest on Employees Provident Fund (EPF) was hiked to 8.65 per cent for this fiscal from 8.55 per cent provided in 2017-18. The EPFO had earlier reduced the interest rate in 2016-17 to 8.65 per cent from 8.8 per cent in 2015-16. The Employees' Provident Fund Organisation's (EPFO) apex decision making body Central Board of Trustees deferred a decision on doubling the minimum monthly pension to Rs 2,000 to its next meeting to be held in March.
"We have decided to provide 8.65 per cent rate of interest on employees' provident fund (EPF) for 2018-19. The decision was taken with the consent of all members (trustees)," Labour Minister Santosh Gangwar said after the CBT meeting here.
Gangwar who also chaired the meeting said, "All members of the CBT at the meeting here agreed to give a higher interest for subscribers for the current fiscal. The proposal would now go to the Finance Ministry for approval. We will also convince them to provide this rate of interest." The minister also told reporters that providing 8.65 per cent rate of interest for this fiscal on EPF would leave a surplus of Rs 151.67 crore and that is why it decided to provide a higher rate this fiscal compared to 2017-18.
According to the EPFO income projections, providing 8.7 per cent rate of interest in EPF would have resulted in a deficit of Rs 158 crore.
Earlier, highly placed sources had indicated that the interest on EPF deposits for this fiscal could be more than 8.55 per cent in view of impending general elections.
Once approved by the CBT, the proposal to provide interest rate for a particular fiscal requires the concurrence of the Finance Ministry. The interest rate is credited into the subscribers account after the Finance Ministry's approval.
The CBT also ratified the amendment in EPF Scheme 1952, to enable accounting of Investment in Exchange Traded Funds (ETFs) (Equity & Related Investment).
The CBT also approved continuation of C-DAC as a consultant to carry out the second phase of Computerisation Project. The Board also gave extension to Standard Chartered Bank as custodian of the the EPFO securities on the existing terms and conditions of agreement for the period upto March 31, 2019.
The CBT approved revised estimate for 2018-19 and budget estimates for 2019-20. The Board gave consent to have performance review of the Portfolio Managers from a separate agency in addition to review by CRISIL Ltd.
1. Welcome change from last year
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The EPFO had provided a five-year low rate of interest of 8.55 per cent to its subscribers for 2017-18. The body had kept the interest rate at 8.65 per cent in 2016-17 and 8.8 per cent in 2015-16. It provided 8.75 per cent interest for 2013-14 as well as 2014-15. The rate of interest was 8.5 per cent in 2012-13.
2. Proposal to double monthly minimum pension not taken
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An EPFO trustee P J Banasure said that the proposal to double the minimum monthly pension to Rs 2,000 has been deferred till next meeting in March.
According to the proposal, doubling the minimum monthly pension would require addition outgo of Rs 3,000 crore. Thus the decision can be taken only after a go ahead by the Finance Ministry.
Now the government is in a fix to double minimum monthly pension because government has already provided for assured monthly pension of Rs 3,000 to informal sector workers under Pradhan Mantri Shram Yogi Mandhan Pension Yojana (PMSYM) announced in Interim Budget earlier this month.
The PMSYM has been opened for subscription from February 15, 2019.
3. Trade Unions want uniformity in minimun pension
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Commenting on the minimum pension, Bhartiya Mazdoor Sangh (BMS) General Secretary Virjesh Upadhyay said, "There should be one minimum pension across all social security schemes run by the government . Therefore, we have demanded for Rs 3,000 minimum monthly pension for the EPFO subscribers." Asked about the EPFO investments in the crisis-hit Infrastructure Leasing & Financial Services (IL&FS), its Central Provident Fund Commission said, "We are watching over it. But we have received regular returns from this investment so far." The EPFO has reportedly invested Rs 570 crore in IL&FS. It invested Rs 1,500 crore recently in Bharat ETF.
