Interest Rate Hike On PF Deposits

Provident Fund Deposits May Fetch More Interest-NDTV-9th June 2014
Retirement fund body EPFO (Employees' Provident Fund Organisation) is likely to provide nine per cent rate of interest on PF deposits for the current fiscal to its over five crore subscribers, slightly higher than 8.75 per cent paid in 2013-14.

"The initial estimates indicate that the Employees' Provident Fund Organisation can easily provide nine per cent rate of interest on PF deposits for 2014-15," a source said.

According to him, the improved market conditions, especially after the formation of a new government at Centre last month, have raised expectations of higher yields on various investments by the body.

EPFO manages a corpus of over Rs. 5 lakh crore. It has received Rs. 71,195 crore as incremental deposits from its subscribers under social security schemes run by it during 2013-14, which is 16 per cent higher than Rs. 61,143 crore collected by it in 2012-13.

The source said EPFO also plans to unlock its investment of around Rs. 55,000 crore in Special Deposit Scheme (SDS). The government pays a fixed rate of eight per cent on SDS to EPFO which is lower than other investment options available in the present legal frame work.

EPFO is also expected to improve yields or returns on its investment under the new norms prescribed under an investment pattern notified by the Labour Ministry last year.

According to the new pattern, EPFO can invest up to 55 per cent of its funds in debt securities issued by banks and financial institution and other body corporates.

The new investment pattern also allows EPFO to invest up to five per cent of its corpus into money market instruments, including units of mutual funds, equity linked schemes regulated by Securities and Exchange Board of India.

The new investment norms also provide for parking up to 55 per cent of the EPFO funds in a new category comprising government and state bonds.