Retirement fund body EPFO paid lesser amount as interest on PF deposits of over five crore subscribers than its earnings between 2007-08 and 2010-11, government auditor CAG has said.
"EPFO (Employees' Provident Fund Organisation) has been paying lesser amount as interest to subscribers than it has been earning on the corpus (except in 2006-07 and 2011-12)," the Comptroller and Auditor General of India (CAG) has said in a report on EPFO for 2011-12, tabled in Parliament.
The CAG has analysed data on interest earned and paid to subscribers by EPFO between 2006-07 and 2011-12. It observed that EPFO earned less on investments and paid more to subscribers in 2006-07 and 2011-12.
According to the report, EPFO earned Rs 7,779.63 crore in 2006-07 and credited Rs 7,976.24 crore into subscriber accounts in the same year. Similarly in 2011-12, it earned Rs 17,879.95 crore and credited Rs 23,145.81 crore accounts of PF subscribers.
In 2007-08, it earned Rs 8,706.88 crore on investments but credited Rs 7,854.60 crore only into subscriber accounts. Similarly a lesser amount of Rs 9,268.15 crore was credited in members' accounts as against an income of Rs 10,667.43 crore in 2008-09.
In 2009-10, it credited Rs 9,631.96 crore as interest compared to its income of Rs 11,933.88 crore It credited an amount of Rs 8,719.53 crore against an income of Rs 14,181.90 crore in 2010-11.
CAG has said there were gaps between declared rate of interest and the rate at which it was earning on investments. EPFO's earnings on investments were 7.49 per cent, 7.17 per cent, 7.46 per cent in that order for three straight fiscals starting 2006-07.
The earnings were 7.09 per cent, 7.05 per cent and 7.53 per cent for 2009-10, 2010-11 and 2011-12, respectively. However the EPFO declared 8.5 per cent rate of interest on PF deposits for four consecutive financial years starting 2006-07.
It raised the rate of interest on PF deposits to 9.5 per cent in 2010-11 after discovering surplus in interest suspense account and then reduced it to 8.25 per cent for 2011-12.
CAG also observed that "total amount of money under EPF corpus was more than cumulative balance with all its subscribers, and the difference was increasing over the years.
The gap could be due to non-updation of accounts, unclaimed accounts, and moneys in transit, etc. which is reflective of inadequate services to its subscribers."
According to the report, the Interest Suspense Account balance was not a true reflection of sums available for distribution as interest to EPF subscribers, in the absence of non-updation of about 38.74 lakh subscribers' accounts as of March 2012.