EPF rate fixed at 8.5% for 06-07
Hindustan Times

Over four crore subscribers of the Employees’ Provident Fund will earn 8.5 per cent interest for the 2006-07 financial year.
The government announced on Saturday that the July recommendation of the Central Board of Trustees of the fund had been notified. Regional fund commissioners have been instructed to immediately implement the decision and issue the annual statement of accounts for 2006-07, said A Vishwanathan, the Central Provident Fund Commissioner.

The notification was issued after the Finance Ministry finally approved the EPF board’s recommendation. It had earlier raised questions on the availability of funds to finance the interest rate, primarily because your money invested by the EPF did not earn as much.

An 8.5 per cent interest on EPF deposits in 2006-07 would cost Rs 7,822 crore though the deposits were expected to earn just about Rs 7372 crore. This leaves a deficit of Rs 449.9 crore.
A sub-committee appointed by the EPF to look into its accounts had indicated this deficit could be met from dipping into reserves and past earnings. The board had accepted this report, agreeing to leave the provident fund with a measly surplus of about Rs 83 crore and Rs 56.7 crore in the special reserve fund.

An official indicated this could be the last year when subscribers would get higher returns than their money earns — largely invested in Special Deposit Scheme and other securities — since the reserves were virtually exhausted.
"Unless some expert rummages through the books and discovers some more reserve funds in the books,” the official said.
There have been proposals to diversify the investment portfolio and putting in 5-10 per cent of the funds in stocks to improve returns on investment. The EPF board has not rejected this proposal but has not approved it either, concerned at the prospect of exposing the fund to market volatilities.

It’s official: 8.5% EPF interest rate for 2006-07
Financial Express

Over four crore subscribers of the Employees Provident Fund (EPF) will earn 8.5% interest on their deposits for the year 2006-07, with the Centre notifying the rate recommended by the EPF Board.
“The Central government has notified the rate of interest for the year 2006-07 at 8.5%,” central provident fund commissioner A Viswanathan told reporters here.

The central board of trustees of EPF had, in July, recommended the 8.5% rate, despite opposition from trade unions that were seeking higher returns at a time when even bank fixed deposits were paying attractive interest rate.
Commercial banks offer up to 9.5% returns on fixed deposits depending on tenure. However, banks have begun cutting rates as they are flush with funds and credit offtake is slow.

The same rate of 8.5% was paid to EPF subscribers in 2005-06.
Viswanathan said all the regional fund commissioners have been instructed to immediately give effect to the decision and issue at the earliest, the annual statement of accounts for 2006-07.
The 8.5% interest will lead to dispersal of Rs 7,550 crore in the accounts of provident fund subscribers but will not result in any deficit for 2006-07.

The Employee Provident Fund which has a corpus of around Rs 1,04,000 crore as on March 31, 2007.