Finance Ministry questions Labour Ministry over 8.65% EPF Interest Rate.
The Ministry of Labour and Employment had shown a green flag to this rate but the Finance Ministry has sought clarifications, with the concerns over EPFO’s ability to pay this level of interest rate.
The Finance Ministry has given a big blow by questioning the sustainability of the 8.65%interest rate for 2016-17 for the subscribers under the Employees’ Provident Fund Organisation (EPFO). The Ministry of Labour and Employment had shown a green flag to this rate but the Finance Ministry has sought clarifications, with the concerns over EPFO’s ability to pay this level of interest rate and the payouts to be made in case of inoperative accounts.
Out of the 17 crore subscribers of EPFO in India, only 4 crores are contributing members. Its been a general practice that the decision of the Central Board of Trustees (CBT), the governing body chaired by the Labour Minister that manages the fund has to be approved by the Finance Ministry before implementation.
“If it (EPFO) earns more, it can pay more. But our main concern is whether 8.65% interest rate is tenable or not. We just want to be sure about their ability to pay this level of interest rate, failing which the Centre won’t be able to provide funds,” a senior Finance Ministry official told The Indian Express.
An official from the Finance Ministry confirmed the news and said that details on number of inoperative accounts have been sought from the Labour Ministry. We have sought details of the total number of accounts with segregation of active and inoperative accounts. We want to ensure that contributing members do not suffer at the cost of inoperative accounts,” he said. The official also confirmed that the Labour Ministry is yet to respond to the queries.
The 8.65 percent interest rate suggested by CBT of EPFO in its 215th meeting in December, is the lowest in last four years. Last year a rate of 8.8 percent was proposed which would have led to a deficit of Rs 383.82 crore in 2016-17. However, the Finance Ministry approved a lower rate of 8.7 percent while this year’s 8.65 percent rate will lead to projected surplus Rs 295.91 crore.