The Employees Provident Fund Board on Saturday recommended a 9.5 per cent interest rate for its around four crore (40 million) subscribers for 2004-05.
For paying 9.5 per cent interest, the country's largest provident fund organisation would incur a deficit of Rs 716 crore (Rs 7.16 billion), Labour Minister K Chandrasekhar Rao said after a marathon five-hour long meeting of the Central Board of Trustees of Employees Provident Fund.
However, the shortfall would be made good from the special reserves of about Rs 950 crore (Rs 9.5 billion).
The special reserves are funds forfeited and parked in the banks over decades and has earned over Rs 600 crore (Rs 6 billion) in interest.
The special reserve fund would be left with a surplus even after bridging the gap for paying 9.5 per cent interest.
At an earlier meeting, EPFO had estimated Rs 927 crore (Rs 9.27 billion) as the shortfall between the interest it earns on investment and that it pays to the beneficiaries.