Workers unions demand increase of PF interest rate

Unions seek better returns on PF loans to govt.
NEW DELHI: Workers unions have demanded higher return from the government on the special deposit scheme where nearly a third of provident fund money of the organised sector workers is parked. Faced with the prospects of a sharp drop in returns on PF from 9.5% last year to 8.25%-8.5% this year, unions have stepped up pressure on the government to increase the rate of return to 9.5% from 8%.

The SDS, money borrowed by the central government, at present yields 8% return for the Employees' Provident Fund Oraganisation (EPFO). The EPFO has suggested a lower 8.25% return for 2011-12 on contributions to adjust for payments outstripping available funds in the previous year when a 9.5% interest rate was declared. Its suggestions will be discussed at the EPFO's finance and investment committee (FIC) meeting on Thursday, which will give its recommendations to the EPFO's highest decision making body, the Central Board of Trustees, that meets the following day.

"We will press for higher returns on SDS which has been at 8% since 2003-04, when it was slashed from 12%. We do not want to accept a lower interest rate on EPF this year, when all other funds are earning higher returns," said BN Rai, secretary general, Bhartiya Mazdoor Sangh.

The government has benchmarked returns on small savings to those on government securities, which in the current high interest rate regime means higher yields for borrowers. Rai said workers will also insist on acceptance of fresh deposits under the scheme, which was discontinued in 2007.
Share of EPF funds channelised into SDS has fallen from 63% in 2003-04 to about 30% now. According to All Indian Trade Union Congress secretary DL Sachdev, there was no logic for keeping the returns on SDS at 8% when the government had increased rate of returns for small saving instruments like the public provident fund to 8.6%.
20 Dec, 2011, 03.21AM IST, Amiti Sen,ET Bureau …ECONOMI TIMES