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Another PF correction: Govt hikes interest rate to 8.8%

India TV Business Desk 29 Apr 2016, 17:22:12 IST
India TV Business Desk

New Delhi: Following protest from the trade unions, the finance ministry has hiked interest rate on provident fund deposits to 8.8 per cent from the 8.7 per cent decided by it earlier.

This is the third time since the budget that government has been forced to roll back its decision over provident fund interest rate.

Government's announcement comes after it faced severe criticsm for deciding on a rate of 8.7 per cent, ignoring the recommendations of a committee that monitors the massive savings scheme.

Earlier, Labour Minister Bandaru Dattatreya had assured trade union Bharatiya Mazdoor Sangh (BMS) that his ministry is pressing upon the Finance Ministry with "all justifications" to uphold an interest rate of 8.8 per cent decided by the Employees' Provident Fund Organisation (EPFO).

Mr Dattatreya gave his assurance to a delegation of Bharatiya Mazdoor Sangh (BMS), which was protesting against the decision of the Finance Ministry to fix the EPF interest rate at 8.7 per cent for 2015-16 lower than 8.8 per cent decided by retirement fund body EPFO.

"Today BMS held demonstrations at 46 EPFO offices throughout the country. A delegation met Labour Minister Bandaru Dattatreya. He said all justifications are being given (to the Finance Ministry) to uphold the CBT decision (of providing 8.8 per cent rate of interest)," BMS general secretary Virjesh Upadhyay told PTI.

BMS has also strongly protested against the Finance Ministry's decision to overrule the Central Board of Trustees', the apex decision-making body of EPFO.

Earlier in February, the Central Board of Trustees had decided to provide a rate of interest of 8.8 per cent to its over five crore subscribers for 2015-16, a tad higher than 8.75 provided in previous two fiscal years.

Later, the Finance Ministry ratified the interest rate of 8.7 per cent earlier this month which sparked strong reaction from the trade unions who termed it as an encroachment on the Central Board of Trustees.

As many as 10 central trade unions have decided to hold a day-long protest against the Finance Ministry's decision on Friday.

However, BMS will not be part of that protest.

Earlier, the government had to face strong protests from unions on proposal to tax EPF and tightening of EPF withdrawals. The government had to roll back these two proposals after drawing flake from the formal sector workers.

The Labour Ministry has sought view of EPFO on the issue before taking it up with the Finance Ministry for reviewing their decision of fixing an interest rate of 8.7 per cent on EPF.