The now announced 8.1 per cent interest rate is the lowest interest rate since 1977-78 on deposits that employees make towards their retirement fund.
Subscribers of Employee Provident Fund (EPF) are now awaiting the payment of interest on their provident fund accounts from the Employees Provident Fund Organisation (EPFO). Earlier, the EPF interest rate was cut to 8.1 per cent, marking a four-decade low for the 2021-22 fiscal year.
This is 0.4 per cent less than the 8.5 per cent interest provided in previous financial year.
In the year 2018-19, the EPF rate stood at 8.65 per cent and in 2017-18 it was 8.55 per cent. The now announced 8.1 per cent interest rate is the lowest interest rate since 1977-78 on deposits that employees make towards their retirement fund.
The currently offered 8.1 per cent interest rate was suggested by the Central Board of Trustees (CBT) after a meeting in Guwahati under the chairmanship of Union Labour and Employment Minister Bhupendra Yadav.
This suggestion will be shared with the Union Finance Ministry and notified to all once it is approved.
As per the statement released, “The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into its subscribers' accounts.”
Why have the interest rates been reduced?
Interest rates are decided on the basis of the earnings of the retirement fund body. Even though the corpus has totalled by 13 per cent, the interest earnings have gone up only 8 per cent.
As per a PTI report, the CBT member stated that the interest rate setting shows the state of the Indian economy and the difficulty the EPFO faces in generating returns from a sizeable corpus
The labour ministry statement does not give reasons for reduction in interest rates. According to the statement, “the Employees' Provident Fund Organisation (EPFO) despite following a conservative approach towards investment, has consistently generated high returns over the last many years which has enabled it to distribute higher interest to its subscribers, through various economic cycles with minimal credit risk.”
“For FY 2022, EPFO decided to liquidate some of its investment in equities and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realized from equity investment. This enabled EPFO to provide a higher return to its subscribers and still allowed EPFO with a surplus to act as a cushion for providing a higher return in the future also. There is no over-drawl on the EPFO corpus due to this income distribution," it added.
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 "EPFO interest rates reduced to lowest since 1977-78 – Check new rates here")
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