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India may lower EPF rate to 9.5%

India is likely to lower the interest rates on a government-administered retirement fund for employees to bring it in line with returns on other government savings schemes, The Economic Times, reported on Thursday.

The paper said the finance ministry was planning to bring rates on deposits under the employees provident fund to 9.5 per cent from 11 percent.

On March 23, the central board of trustees of the EPF recommended a cut in interest rates on deposits to 10.25 per cent from 11 per cent.

"The finance ministry is understood to have opposed the March 23 proposal of the central board of trustees of the EPF to pay interest rate of 10.25 per cent on running balances with effect from April 1," the paper said.

This decision would align rates with schemes such as the public provident fund and other small savings schemes with the post office.

Rates on these schemes were cut in the Union Budget for 2001-02 as part of the government's moves to bring down the overall level of interest rates in the economy.

Rates on these schemes are used by banks as benchmarks to price their longer-term deposits.

The EPF, which holds close to Rs 542 billion, is a savings scheme under which money is collected from all non-government employees. It is managed by a board of trustees and headed by the labour minister.

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