Provident Fund interest rate dropped from 9.50% to 8.50%

The approximately four crore subscribers of the Employees Provident Fund Organisation (EPFO) will have to undergo a loss of one percentage interest, compared to last year, on their provident fund deposits.

The Central Board of Trustees (CBT) of EPFO on 7-12-2005 finally announced a 8.50% interest for provident fund deposits for 2005-06, against last year's 9.50%. The Labour Minister, Mr K. Chandrasekhar Rao, who is the Chairman of the EPFO, said that, even for paying 8.50% interest, there would be a shortfall of Rs 370 crore.

The Minister said he will not seek Government support for raising this Rs 370 crore but will look at ways of generating resources internally.

Though dropping of rate by 1% is not acceptable, I feel 8.50% is still a reasonable return for a guaranteed investment like this. The concerned department should look at investing the monies in large guaranteed securities which yield more returns so that higher benefits can be passed on to the mass.