The Centre rolled back on Friday a decision to lower the interest to 8.7% on the Employees Provident Fund (EPF) and said deposits will earn 8.8% interest for 2015-16 as originally recommended by the Central Board of Trustees, EPFO’s apex decision-making body.
The move comes in the wake of a day-long nationwide protest called by the central trade unions against the finance ministry’s decision to lower the interest rate.
The government on Monday had informed Parliament that the finance ministry had approved an interest rate of 8.7% as against the CBT’s recommendation.
“The CBT, at its meeting held in February 2016, has proposed an interim rate of interest at 8.8% to be credited to the accounts of Employees’ Provident Fund subscribers for 2015-16. The ministry of finance has, however, ratified an interest rate of 8.7%,” labour minister Bandaru Dattatreya had said in a written reply to the Lok Sabha.
In approving a lower rate of interest, the finance ministry had argued that it was done to bring it closer to other small saving schemes.
The ministry last month had lowered the interest of on small saving schemes including Public Provident Fund (PPF) scheme and Kisan Vikas Patra to 8.1% and 7.8%, respectively, from 8.7% in 2015-16.
The trade unions had slammed the “unilateral undemocratic” action by the ministry saying it had completely ignored the unanimous decision of the tripartite body of the EPFO.
The labour ministry too had backed 8.8% interest as recommended by the CBT headed by Dattatreya, who said the decision was taken after reaching a consensus.
Earlier this month, the government had rolled back new norms on provident fund withdrawals after violent protests in Bengaluru by garment factory workers who set ablaze 15 buses and attacked a police station in the country’s IT hub.
The rollback meant that PF subscribers can continue to withdraw their entire retirement fund in case of unemployment for two months or more. The government had proposed to put a bar on the 100% withdrawal, leading to discontent among the five crore-odd PF subscribers.
The decision marked the government’s second u-turn on changes to the pension fund. In March, the government withdrew a plan to tax EPF withdrawals after an outcry from salaried workers.