NOW, ALL PSU BANKS MAY GET TO TAKE EPF DEPOSITSIshta Vohra

New Delhi: Public sector major State Bank of India (SBI) is set to lose its monopoly as the only bank where provident fund receipts of over four crore subscribers are deposited. The EPFO establishment is understood to have mooted the possibility of expanding the network by including all other nationalised banks as deposit points. Speaking to the ET, Central Provident Fund Commissioner (CPFC) A Vishwanathan said the proposal to this effect has been mooted and “all nationalised banks have been approached for the same and a response is awaited.” The move is expected to address two key issues: Firstly, it would ensure faster clearance of PF remittances by banks. This would help depositors to start earning interest on their deposits sooner than before. Secondly, higher number of deposit points means increased accommodation of an additional 45 lakh-plus new subscribers expected to come under the ambit of EPF Act shortly. This follows the recent move by the central board of trustees (CBT), according to which, PF provisions will now be applicable to all establishments with 10 or more employees . The EPF Act was till now applicable only to establishments that employed 20 or more employees but the CBT, at its last meeting earlier this month, approved necessary changes in a concerted bid to bolster the EPFO’s sagging finances, thanks to increasingly lower returns on investments. The decision comes in tandem with the EPFO’s finance and investment committee (F&IC ) that on July 25 shortlisted three asset management companies — HSBC, ICICI Prudential and SBI — in the financial round (out of 15) to manage its yearly incremental deposit of over Rs 25,000 crore. “The process of clearing PF remittances and crediting them to the EPFO account will be much speedier than at present for subscribers. Currently, it can take as much as three days or even longer in the event the subscriber/employer does not maintain an account with SBI,” the CPFC pointed out. That delay has proved very costly for the EPF and its finances in the past several decades, as (F&IC ) discovered last year, after an auditor submitted his report on charges of mismanagement of funds by SBI to it. The auditor had cleared SBI of several charges that led to an yield of only 8.25% on the EPF’s investments in 2007-08 compared to the higher yields that even small investors were earning. Bulk deposits by corporate houses in the fixed income market, too, earned rates ranging from 10.5% and 13% for short maturities. The EPFO paid out 8.5% rate to its subscribers despite the poor earnings on investments for the year, leading to a deficit of Rs 263.78 crore. F&IC , which later complained formally to the Institute of Chartered Accountants of India (ICAI) against the auditor’s report, had alleged that SBI had let EPF funds, as much as Rs 150 crore at times on a day to day basis, lie idle in its branches for several days, denying appropriate returns. F&IC’s request of a day to day interest on the funds was turned down by SBI, citing RBI rules. The committee also charged that SBI had deliberately parked a good chunk of EPF funds in the bank’s own low yielding term deposits, ensuring that the EPFO’s returns were low even while the bank advantaged itself. “We hope to see a rise in our subscriber base soon, now that the CBT has approved changes in the EPF law that will bring establishments with 10 or more workers under its ambit. The larger collection base for retirement funds means that its management, and that includes collection, has to be better than it is now,” CPFC Vishwanathan said.

Source: The Economic Times