Finance Minister Pranab Mukherjee will soon give the green signal to the payment of 9.5 per cent interest rate on provident fund deposits during 2010-11, a senior government official said on Tuesday.
“We can get ratification on 9.5 per cent for the fiscal from the finance ministry any moment before March 31, 2011,” labour secretary P C Chaturvedi said.
He was speaking to reporters ahead of the meeting of the Central Board of Trustees, the highest policy making body of the Employees’ Provident Fund Organisation.
Although CBT, which is headed by labour minister, had decided to give a higher return of 9.5 per cent on provident fund deposits for 2010-11, the Finance Ministry had expressed its reservation on the move.
Downplaying the ongoing tussle between the two ministries over hiking the interest rates on provident fund deposits, Chaturvedi said, “These are just consultations between the two ministries.”
The views of the finance ministry over the payment of interest rates will be placed before the CBT, he said, pointing out that decision of the trustees had always been accepted by the government in the past.
In case the row remains unresolved, EPFO sources said, the issue would be taken up by the two ministries informally with Prime Minister Manmohan Singh.
Following discovery of Rs 1,731.57 crore (Rs 17.315 billion) in suspense account, the CBT raised rate of interest on provident fund deposits to 9.5 per cent for its 4.71 crore (47.10 million) subscribers from 8.5 per cent which is being paid by EPFO since 2005-06.
The decision, however, did not find favour with the finance ministry which argued that there was no real surplus.
It said the surplus shown by the EPFO arose because all subscribers’ accounts were not updated.
In a recent letter of January 29, the labour ministry argued the EPFO is not asking for any government support for the extra returns to the salaried workers. It is their money which has earned returns.
The finance ministry’s objections were based on a report by Comptroller and Auditor General which suggested that there was no surplus with the EPFO’s interest suspense account.
The finance ministry has to give concurrence to the rate of return decided by CBT and notify allowing tax exemption on entire such earnings on PF deposits.
EPFO resumes investment in scam-hit LIC Housing Finance
Retirement fund manager EPFO’s trustees on Tuesday approved a proposal to resume investment in the scam-hit LIC Housing Finance, a subsidiary of the country’s largest insurance company Life Insurance Corporation.
The decision to resume investment in the LIC Housing Finance was taken at the meeting of the Central Board of Trustees.
The CBT had suspended investment in housing finance company following disclosure of the bribe-for-loans scam in November 2010 in which top officials of the LIC Housing Finance were allegedly involved.
“Amount invested in LIC Housing Finance is not much…approved investment is only about Rs 800 crore,” CBT member and Secretary All India Trade Union Congress D L Sachdev told reporters after the CBT meeting.
The EPFO had invested Rs 454 crore (Rs 4.54 billion) in the bonds of LIC Housing Finance Company. The fund manager’s prevailing investment norms allow for investment of up to Rs 846 crore (Rs 8.46 billion) in the company.
The EPFO’s advisory body, the Finance and Investment Committee, took up the issue in its meeting on January 28 and recommended resumption of investment in LIC Housing Finance.
LIC Housing Finance went through a bad phase after CBI in November arrested its CEO Ramachandran Nair and seven other senior bankers for allegedly colluding with real estate firms to sanction large-scale corporate loans, overriding the mandatory due diligence involved in such approvals, besides other irregularities.