Reversing its five year old decision, which barred inoperative EPF accounts from earning interest, the Central Board of Trustees (CBT), the highest decision making body of the EPF organization has decided to pay interest on all such accounts from April 1. Inoperative EPF accounts are those where there have been no contributions by an employee or their employer for 36 months. The move will benefit over nine crore such account-holders having total deposits of over Rs 32,000 crore.
The interest would be paid on prospective basis. For the current year, EPFO has proposed to pay 8.8% rate of interest on provident funds for the current fiscal, up from 8.75% in the last fiscal. The finance ministry, however, is yet to notify the rate. The decision comes in the wake of a recent EPFO notification on February 25 that had restricted withdrawal of EPF accumulations. As per the notification, EPF subscribers will not be able to withdraw their provident fund after attaining the age of 54, and will have to wait until they are 57 years to withdraw. As per earlier rules, EPF subscribers were allowed to claim 90% of the corpus in their account at the age of 54.
Earlier in the year 2011, the UPA government had stopped interest on such accounts. But, the Modi government has restored it. It is a pro-worker decision, said Labour Minister Bandaru Dattatreya. The UPA government had discontinued interest on idle accounts in a bid to persuade employees to withdraw the money or merge it with active accounts. The EPFO has since been earning money from the funds in these accounts, which are being invested.
Out of a total of over 15 crore EPF accounts, about nine crore accounts worth Rs 32,000 crore are inoperative ,mostly belonging to people who have switched jobs but did not transfer their EPF savings.