Saturday, July 19, 2008

EPFO should invest in market instruments for better returns: FM


New Delhi: Finance Minister P Chidambaram has sought to suggest that the Employees' Provident Fund Organisation (EPFO) may invest funds in high yielding instruments in order to provide better returns to its over four crore subscribers.

When asked whether there is a case for increasing the EPF rate in view of the rising inflation, he told PTI that the Government cannot increase the interest rates on Special Deposit Schemes (SDS), where the bulk of the EPF funds are parked.

"SDS gets eight per cent returns. You cannot touch that eight per cent, because that applies to very many instruments also. So, it cannot be looked at in isolation," he said.

The EPFO, however, he added, was welcome to take money and invest it elsewhere, if they can get better returns.

"We have told them (EPFO) two-three years ago that you can withdraw SDS money and invest it elsewhere," he said.

Finance Minister's statement comes after some members of the Central Board of Trustees of EPFO has raised the demand for increasing interest rate on provident fund from 8.5 per cent to 12 per cent in view of the rising inflation.

EPFO board had earlier rejected the proposal to invest five per cent of its funds in the stock market following opposition from trade unions.

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The board at the recent meeting of the trustees on July 5 deferred the decision on revising the interest rates.

With inflation inching towards 12 per cent mark, 8.5 per cent interest rate fetches negative real returns.

Courtesy: sify.com

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