The Employees Provident Fund Organisation (EPFO) and the Union labour ministry will retail the interest rate of 8.65 percent in spite the finance ministry’s concern that the rate is too high, Mint reported, citing people aware of the development. The EPFO and the ministry will communicate the decision to the higher authorities added the report.
On February 21, the EPFO had kept the interest rates at 8.65 percent, 10 basis points higher than 8.55 percent the previous year. One basis point is one-hundredth of a percentage point.
The ministry believes that the higher interest rate will not justify the fund’s performance but two officials with knowledge of the discussions told Reuters that the bigger factor is concerned with the high return that would jeopardize the economy by slashing banks’ ability to lend at attractive rates.
EPFO’s central board of trustees is a tripartite body, and has representation from the finance ministry as well. When the decision was taken, it was unanimous. Four months after a decision was taken, you cannot go back. The message for the working class as well as the political bosses will be far-reaching, a government official, the first of the three people cited above told Mint.
The labour ministry feels that since the government does not provide subsidy on the EPF rate and that the payout is based on the EPFO’s investment returns, there is barely any logic to penalise the working class, a second official told Mint.
