Brushing aside apprehensions, retirement fund manager EPFO today said PF trusts set up by corporates can pay a higher interest rate of 9.5 per cent for 2010-11 as they may also have surplus in their accounts.
"The recognised provident funds (PF) would not find any difficulty in paying 9.5 per cent rate of return to its depositors as they follow the same cash accounting system followed by EPFO," Central Provident Fund Commissioner Samirendra Chatterjee said.
"We found surplus of Rs 1,731.57 crore when we analysed the accounts on accrual-based system. Similarly, they (exempted funds) would also find surplus following the same accounting method," he added.
Earlier on September 15, EPFO's Trustees raised interest rate on provident fund deposits to 9.5 per cent for 2010-11 benefiting nearly 4.71 crore employees of both public and private sectors.
There are over 3,000 recognised provident fund trusts which manage a huge corpus of about Rs 2 lakh crore. These trusts, which are set up by corporates to manage provident fund of their employees, are required to pay a rate of return that is not less than the rate paid by EPFO.
As the Central Board of Trustees (CBT), the highest policy making body of the EPFO, had decided to raise the interest rate by a percentage point to 9.5 per cent, the PF trusts will also be required to match the rate of return. "None of the recognised provident fund has approached us so far with a complaint that they cannot manage 9.5 per cent rate of return for this fiscal," Chatterjee said.
Some media reports had suggested that it would be difficult for the recognised provident funds to give 9.5 per cent return as they may not find surplus in their accounts. EPFO, Chatterjee said after reconciliation of account on accrual-based system found that it had a surplus of Rs 1,731 crore.
As the money belonged to over six crore subscribers, the CBT decided to raise the interest rate for this fiscal by a percentage point to 9.5 from 8.5 per cent, a rate being maintained for the past five years since 2005-06.
Explaining that there was no hidden amount, nor has any thing has been recovered, Chatterjee said, "Nothing is off balance sheet which is regularly audited by the Comptroller and Auditor General (CAG)."
In EPFO, the cash system of accounting is followed and not the accrual system, which is the practice in commercial accounting. As a result, the interest suspense account in the EPFO every year shows a huge balance of over Rs 10,000 crore or more in the balance sheet because the members account have not actually been credited and there is a backlog.
For the first time, EPFO have calculated the interest payable to the depositors on accrual basis to analyse the details of Rs 14,696 crore lying in the interest account. Thus, it is an attempt to bring transparency because accrual system of accounting is more scientific, he added.