EPF Interest rate fixed at 9.5% for 2010-11
Good news for EPF account holders, the interest rate for EPF accounts for the year 2010-11 has been declared as 9.5% instead of 8.5%, which was stagnant since 5 years. This increase of 1 percentage point in the interest rate would cost EPFO an additional Rs.1700 crore but officials have said that there is an Interest suspense account that has Rs.1731 in surplus which will be used to meet the demand.
Bankers on the other hand are slightly worried, it seems, as there is significant difference between Bank savings interest rate and EPF interest rates, which might make the employees shift for EPF savings accounts instead of regular bank accounts. However, one cannot be sure that the same interest rate of 9.5% will be continued in the next financial year or not.
RBI, on the other hand, is all set to convene another meet to, may be, increase the key rates by another 50 bps to keep inflation in control, says some reports. This could mean another round of Interest rates increase by Banks’.
EPFO Board has also said on this occasion that it would stop adding interest rate to those accounts that are Inoperative from 1 April 2011. It also added that it will only continue in its current working procedure of investing EPF funds in Government and PFI bonds and securities and not consider putting them into Equity market. This is not surprising as ‘Risk’ is the last word to hear when talking about ‘Pension’.