State Bank of India’s financial research team has suggested for equality in interest rates paid to subscribers of the government-run Employee Provident Fund (EPF), which is open only to salaried employees and to pay for its public provident fund (PPF) service retirement or any non-refundable expenses Can be applied for and used as an account to keep away. In a country where very few people have pensions, the cost of old age is likely to rise, and health emergencies are becoming more frequent and costly, both of which cannot be overstated.
Such action would be justified. The main purpose of the PPF is to provide social security for those who are not on official parole and those who do not have the standard retail benefits of their opponents working in the organized sector. However, the interest rate on PPF savings has been linked to market levels, which has led to a steady decline (currently to 7.1 per cent) and widening the gap available to EPF clients (last announced 8.5%). EPF is mandatory for employees and PPF is voluntary, which justifies a slight gap, as most PPF savers are more vulnerable and deserve a better deal.
Convergence is in order. In particular, this should be done by raising PPF rates to the EPF level, not the other way around. As inflation rises and risk increases, long-term savers need interest rates. If the interest paid is less than the rate at which the rupee loses its purchasing power, the savers end up with deposits that actually shrink. Bank depositors can afford it if it is only for a short period of time, but all retirement savers should avoid such financial repression and at least 3 percentage points. The irony is that raising the PPF rate will keep money away from banks.