Prajna Capital - An Investment Guide

THE government is considering an ordinance to get more organisations to join the Employees’ Provident Fund Organisation ( EPFO ), bringing additional 45 lakh workers within the coverage of a formal retirement benefit scheme. At present, all non-government establishments having more than 20 employees have to park the retirement savings of their employees with the Employees’ Provident Fund ( EPF ), the flagship retirement benefit scheme of the EPFO. A small portion of the employee’s saving also goes to another scheme run by the EPFO, the Employees’ Pension Scheme ( EPS ). The government wants to bring down the threshold limit to establishments having more than 10 employees. This will add another 45 lakh subscribers to EPF’s current about four crore members. Since the government does not have the time to move a formal Bill to effect the change in the current session of Parliament, it is considering an ordinance. The government is keen to bring an amendment and ensure social secur...

THE Employees’ Provident Fund Organisation can comfortably offer 8.5% interest rate to its 4.41 crore depositors during 2009-10 and still record a surplus contrary to Rs 139-crore losses suffered by it for giving the same benefit during the current fiscal. The issue of return to the depositors would be discussed at a meeting of the ‘finance and investment committee’ (FIC) on Thursday, agenda for which lists that maintaining an 8.5% interest could still give the fund a surplus of Rs 6.4 crore on the investment made by the fund. If EPFO maintains the interest rate of 8.5% on PF deposits, there will be a surplus of Rs 6.4 crore at an estimated income of Rs 12,994 crore in 2009-10. In case the interest is raised to 8.75%, the fund would suffer a loss of Rs 366.77 crore and the deficit would be still higher at Rs 739.94 crore if the rate of interest is fixed at 9%. FIC gives recommendations on financial matters to the apex EPFO body Central Board of Trustees (CBT), which takes the final ...