In a bad new for the employees, government has decided to cut interest rate on Employees' Provident Fund (EPF) from 9.50 per cent to 8.25 per cent in 2011-12.
The 1.25 per cent cut in the interest rate is the single largest rate cut in over a decade.
"It is to inform that the Ministry of Labour and Employment has conveyed the approval of the Central government to credit interest at 8.25 per cent for the year 2011-12 to the account of each member of the
scheme. You are accordingly requested to issue necessary instructions to all concerned for crediting the interest to the members’ accounts," said a circular posted on Employees Provident Fund Organisation official website.
The labour ministry was said to be demanding at least 8.6 per cent interest rates. However, this was not agreed by the finance ministry.
The cut in interest rates is expected to draw negative reaction from the trade unions, who were insisting for a budgetary support from the government to maintain 9.5 per cent as the interest rate. This was one of the demands during the day-long general strike on February 28. The interest rate was 8.5 per cent in 2009-10.
The Employees' Provident Fund Organisation (EPFO) had provided 9.5 per cent interest rate to its subscribers for 2010-11 after it found Rs1,731 crore surplus in its books of account.
In December, the financial advisory committee of the EPFO had recommended 8.25 per cent as the interest rate for current fiscal.