Private PF trusts can pay 9.5% interest: EPFO- Business News

EPFO nod to 9.5% interest

Employees Provident Fund Organisation says PF trusts set up by corporates can pay a higher interest rate of 9.5 per cent for 2010-11, as they may also have surplus in their accounts.

  • New Delhi,  September 25, 2010  
  • |  
  • UPDATED   09:18 IST

Brushing aside apprehensions, retirement fund manager Employees Provident Fund Organisation (EPFO) on Wednesday said PF trusts set up by corporates can pay a higher interest rate of 9.5 per cent for 2010-11, as they may also have surplus in their accounts.

"The recognised provident funds (PF) would not find any difficulty in paying 9.5 per cent rate-of-return to its depositors, as they follow the same cash accounting system followed by EPFO," Central Provident Fund Commissioner, Samirendra Chatterjee, said.
"We found surplus of Rs 1,731.57 crore when we analysed the accounts on accrual-based system. Similarly, they (exempted funds) would also find surplus following the same method," he added.

Earlier, on September 15, EPFO's Trustees raised the interest rate on provident fund deposits to 9.5 per cent for 2010-11, benefiting nearly 4.71 crore employees of both public and private sectors.

There are over 3,000 recognised provident fund trusts which manage a huge corpus of about Rs 2 lakh crore. These trusts, set up by corporates to manage provident fund of their employees, are required to pay a rate of return that is not less than the rate paid by EPFO.

As the Central Board of Trustees (CBT), the highest policy making body of the EPFO, had decided to raise the interest rate by a percentage point to 9.5 per cent, the PF trusts will also be required to match the rate of return.

"None of the recognised provident fund has approached us so far with a complaint that they cannot manage 9.5 per cent rate of return for this financial year," Chatterjee said.

Some media reports had suggested it would be difficult for the recognised provident funds to give 9.5 per cent return, as they may not find surplus in their accounts.

Since the surplus Rs 1,731.57 crore belonged to over six crore subscribers, the CBT decided to raise the interest rate for this financial year by a percentage point to 9.5 per cent, from 8.5 per cent - a rate being maintained for the past five years, since 2005-06.

Explaining there was no hidden amount, nor has anything been recovered, Chatterjee said: "Nothing is off balance sheet, which is regularly audited by the Comptroller and Auditor General."

In EPFO, the cash system of accounting is followed and not the accrual system, which is the practice in commercial accounting. As a result, the interest suspense account in the EPFO shows a huge balance of over Rs 10,000 crore or more in the balance sheet ever year. This because the members account have not actually been credited and there is a backlog.

For the first time, EPFO have calculated the interest payable to the depositors on an accrual basis, to analyse the details of Rs 14,696 crore lying in the interest account.