NEW DELHI: The labour ministry and Employees Provident Fund Organisation ( EPFO ) are sticking to the 8.65% return proposed by the retirement savings body’s board of trustees, citing adequate reserves and the Narendra Modi government’s pre-poll political backing to the plan.The finance ministry has objected to the proposal for increasing the payout for 2018-19 to 8.65% from 8.55% in the previous year, and sought a review. The objection comes at a time when banks have been refusing to lower lending rates pointing to the high cost of funds, which in turn is linked to their inability to pare deposit rates. Banks have argued that small savings schemes such as public provident fund and EPFO offer higher interest rates and a reduction in deposit rates will impact their fund-raising ability.While the finance ministry has been pointing to a falling rate regime, it’s a different matter that it either didn’t see the need to lower rates on PPF and other small savings schemes ahead of the budget despite RBI signalling a bias towards a softer rate regime.Although many in EPFO saw the finance ministry response as “routine”, they pointed out that there was little merit in some of the arguments. For instance, sources said, EPFO will be left with a surplus of over Rs 150 crore despite the higher payout. In addition, they said that the impact of the falling rates on the fund’s earnings had already been factored in since the financial year was over, while ruling out any move to go back on the plan.Even labour unions, whose representatives sit on the EPFO board as trustees, are unwilling to settle for a reversal of the decision. Sources said that over the next few days the labour ministry will formally respond to the finance ministry’s objections.Besides, they said, a reversal at this stage will be a major embarrassment for the Modi government as the EPFO board chaired by labour minister Santosh Gangwar had endorsed the plan for an increase in interest rates.