9.5% EPF interest for '04-05 may be slashed

<div class="section0"><div class="Normal"><span style="" font-size:="">KOLKATA: The Central Board of Trustees (CBT) of Employees Provident Fund Organisation (EPFO) is likely to discard an interest payment liability of 9.5% for 2004-05. A meeting of the CBT has been convened on May 28 to thrash out the issue and chances are that it will recommend a lower rate of return.</span><br /><br /><span style="" font-size:="">Talking to TOI, top EPFO sources disclosed that it will have to incur a loss of as high as Rs 206 crore if it has to maintain an interest payment liability of even 8.5%. If EPFO has to offer a 9.5% return then it will be left with no other alternative but to dig into its reserves (the amount which is currently lying in its interest suspense account) as the prospect of having any government subsidy is being ruled out. </span><br /><br /><span style="" font-size:="">But, assuming that it will have to dole out an interest of 9.5% as promised by the government, specially to appease the Left, the EPFO will have to bank heavily on a corpus of over Rs 8500 crore lying in interest suspense account to bail itself out. There are also indications that EPFO will appoint a CA firm to ascertain whether the fund lying in interest suspense account should be treated as reserve or as current balance. </span><br /><br /><span style="" font-size:="">It might be pointed out that currently the EPFO deploys its funds only in Central government securities, state government guaranteed securities and public sector financial institutions where the average rate of return is 6-6.5%. While it used to deploy nearly 75% of its funds in special deposit scheme (SDS) earlier, however, the government has discontinued with it. The return on SDS was as high as 8% per annum. </span><br /><br /><span style="" font-size:="">Sources revealed that the PF board of trustees is toying with the idea of having a second banker and fund manager besides State Bank of India (SBI). They said that the issue has been informally discussed by the members of the finance and investment committee (who are also on the board) of the organisation. </span><br /><br /><span style="" font-size:="">The EPFO board feels that with margins getting strained, options should be explored for better returns. </span></div> </div>