EPF rate may be cut to 8%

NEW DELHI: The interest rate on the Employees'' Provident Fund is as politically sensitive as numbers can get. And that number is expected to come down all the way from 9.5% last year to 8% in the current one — that is the recommendation of a crucial sub-committee of the Central Board of Trustees of the Employees'' Provident Fund Organisation.
Earlier this month, the Central Board of Trustees had ducked a decision on the sensitive subject of fixing the interest rate on EPF for the current year. While it was pretty clear that the rate would have to come down form the 9.5% paid out last year, following the lowering of the interest rate on the Special Deposit Scheme, in which 80% of provident fund monies are invested, to 8% for the current year.
The only issue was how much lower the rate would be. The CBT entrusted the task to its finance and investment committee.
Labour minister Sahib Singh Verma has so far bravely resisted an EPF rate cut as it is apparent that the cut would be a political dynamite. Employees, a major constituent of the BJP, was bound to get aggrieved, and the opposition too would latch on to the issue to make things as uncomfortable as possible for the government. However, options have run out for the government and Mr Verma appears to have finally seen the writing on the wall.
The PF managers face a piquant situation. The EPFO is mandated to invest according to the pattern recommended by the finance ministry. And it is debarred from trading in securities. So its income has to come from investment in the limited opportunities given to it.