So RBI which raised almost 25 basis points on the Repo and Reverse Repo rate , Government announced that 4.75 Lakh people who have invested in Provident Fund will get 1 Percent more interest from now ,On Thursday, the government approved an increase in interest rates on provident fund balances to 9.5% for the current financial year, from 8.5% in the past few years. The move will result in a percentage point increase in interest rate on the entire balance lying with the Employees Provident Fund Organization or approved provident fund trusts. This is the highest payout in five years.
Some Story behind the raise of interestSource:Economictimes.
Last September, the EPFO had declared a 9.5% interest for 2010-11, against the 8.5% it had been paying since 2005-06, after discovering a surplus of Rs 1,733 crore in its interest suspense account following a change in accounting procedure.
The calculation was questioned by the finance ministry, which went on to seek a snap audit by the Comptroller and Auditor General of India , or CAG.
The CAG audit found that as on March 31, 2010, of the over-five crore EPF accounts, 4.72 crore accounts had not been updated, or credited interest.
Based on this, the CAG had said that the surplus could not be verified as a large number of accounts had not been updated.
It, however, did not go into the question whether there would be a surplus to justify the higher payout once accounts had been updated.
Based on the findings, the finance ministry had refused to ratify the decision to pay 1% higher interest. In the absence of a surplus, the government would have to provide funds to bridge the deficit.
The EPFO has now convinced the ministry that the surplus amount will be available even after accounts are updated.
The organization had updated 1.1 crore accounts by the end of last year. What is not clear yet is the action the ministry will take if the EPFO fails to update accounts within the stipulated time.
It is doubtful whether the EPFO has the means to work on 4.7 crore accounts in such a short time. “We will have to try our best,” another official said.