Govt cuts EPF interest rates

Finance ministry overrules trustees, settles for 8.7% interest

The finance minister has overruled a decision of the Employees' Provident Fund Organisation and cut the interest rate to 8.7 per cent for the financial year 2015-16.

The Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) had approved an 8.8 per cent interest rate. For financial years 2013-14 and 2014-15, the interest rate was 8.75 per cent.

However, Union Labour Minister Bandaru Dattatreya, in a written reply to the Lok Sabha on Monday, said: "The CBT, at its meeting held in February, had proposed an interim rate of interest at 8.8 per cent to be credited to the accounts of Employees' Provident Fund subscribers for 2015-16. The ministry of finance has, however, ratified an interest rate of 8.7 per cent."

Trade unions were, naturally, unhappy with the decision, and accused the finance ministry of disrespecting the CBT - the supreme decision-making body of the EPFO.

ALSO READ: EPFO to launch system for discouraging premature withdrawals

According to regulations, after the interest rate is approved by the CBT, it has to be approved by the finance ministry.

A labour ministry official said normally, the finance ministry vets the rate which is taken by the CBT since EPFO distributes interest rate according to the income generated from its investments every year and does not take money from the government. The finance ministry generally accepts the CBT's decision. "This is unprecedented. It has never happened before. The labour ministry is in its full right to request the government to reconsider this decision. We will take a decision soon in this regard," said the official.

Earlier, the Financial Audit and Investment Committee (FIAC) consisting of representatives of employees, employers and the government, projected that EPFO would earn Rs 34,844 crore in 2015-16, which would be sufficient to offer an interest rate of 8.95 per cent to the retirement fund body's 50 million subscribers.

According to the FIAC estimate, after giving an interest of 8.8 per cent, the EPFO would be left with a surplus of Rs 673 crore. An EPFO official explained if the finance ministry sticks to its decision, the retirement body can pay the remaining 0.1 per cent as bonus or ex gratia. "The ministry can take this decision in order not to antagonise the unions which are already on offensive," the labour ministry official said. Trade unions said the decision was a complete disrespect of the CBT's authority.

"This is unconstitutional. The finance ministry has disrespected the decision taken by the body which has representation from employers and employees," said P J Banasure, secretary, Bharatiya Mazdoor Sangh (BMS) and a CBT member. D L Sachdeva, general secretary, All India Trade Union Congress, said it was unprecedented in EPFO's history.

"We are going to launch a protest against this decision after discussion with other central trade unions, this is an anti-people move," he said. "The finance ministry is on an offensive against the common man, which has started from the latest Budget. The labour minister had earlier said it (the EPFO interest rate) could be increased more with the surplus it had. We are going to protest against it," said A K Padmanabhan, president, Centre of Indian Trade Unions.

Business Standard New Delhi,26th April 2016

RBI deputy governor cautions fintech platform lenders on privacy concerns during loan recovery

India's digital lending infrastructure has made the loan sanctioning system online. Yet, loan recovery still needs a “feet on the street” approach, Swaminathan J, deputy governor of the Reserve Bank of India, said at a media event on Tuesday, September 2, according to news agency ANI.According to the ANI report, the deputy governor flagged that fintech operators in the digital lending segment are giving out loans to customers with poor credit profiles and later using aggressive recovery tactics.“While loan sanctioning and disbursement have become increasingly digital, effective collection and recovery still require a 'feet on the street' and empathetic approach. Many fintech platforms operate on a business model that involves extending small-value loans to customers often with poor credit profiles,” Swaminathan J said. Fintech platforms' business models The central bank deputy governor highlighted that many fintech platforms' business models involve providing sm

Credit card spending growth declines on RBI gaze, stress build-up

Credit card spends have further slowed down to 16.6 per cent in the current financial year (FY25), following the Reserve Bank of India’s tightening of unsecured lending norms and rising delinquencies, and increased stress in the portfolio.Typically, during the festival season (September–December), credit card spends peak as several credit card-issuing banks offer discounts and cashbacks on e-commerce and other platforms. This is a reversal of trend in the past three financial years stretching to FY21 due to RBI’s restrictions.In the previous financial year (FY24), credit card spends rose by 27.8 per cent, but were low compared to FY23 which surged by 47.5 per cent. In FY22, the spending increased 54.1 per cent, according to data compiled by Macquarie Research.ICICI Bank recorded 4.4 per cent gross credit losses in its FY24 credit card portfolio as against 3.2 per cent year-on-year. SBI Cards’ credit losses in the segment stood at 7.4 per cent in FY24 and 6.2 per cent in FY23, the rep

India can't rely on wealthy to drive growth: Ex-RBI Dy Guv Viral Acharya

India can’t rely on wealthy individuals to drive growth and expect the overall economy to improve, Viral Acharya, former deputy governor of the Reserve Bank of India (RBI) said on Monday.Acharya, who is the C V Starr Professor of Economics in the Department of Finance at New York University’s Stern School of Business (NYU-Stern), said after the Covid-19 pandemic, rural consumption and investments have weakened.We can’t be pumping our growth through the rich and expect that the economy as a whole will do better,” he said while speaking at an event organised by Elara Capital here.f there has to be a trickle-down, it should have actually happened by now,” Acharya said, adding that when the rich keep getting wealthier and wealthier, they have a savings problem. “The bank account keeps getting bigger, hence they look for financial assets to invest in. India is closed, so our money can't go outside India that easily. So, it has to chase the limited financial assets in the country and

CA Online

Search This Blog