The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation in its meeting in Guwahati has recommended 8.10 per cent interest rate for its subscribers for financial year 2021-22, two Board members told The Indian Express. This is the lowest interest rate in at least four decades.
The EPFO Board had in March last year, finalised a recommendation of 8.5 per cent interest rate for the previous financial year 2020-21.
The CBT, headed by the Union Labour Minister and having representatives from employers’ and employees’ side, makes the recommendation for interest rate. The recommendation is then ratified by the Finance Ministry.
The EPFO had retained the interest rate on PF deposits for 2020-21 at 8.5 per cent, the same rate as in 2019-20, despite the substantial withdrawals in the wake of Covid’s impact on people’s financial resources. The retirement fund body saw high withdrawals and lower contributions in the aftermath of the Covid-19 pandemic. Until December 31, the EPFO had settled 56.79 lakh claims worth Rs 14,310.21 crore provided under the advance facility.
Over the years, the Finance Ministry has questioned a relatively high rate retained by EPFO, and has been nudging it to reduce the rate to a sub-8 per cent level in line with the overall interest rate scenario. EPFO rate continues to be the highest among other savings instruments. Small savings rates range from 4.0 per cent to 7.6 per cent, and have been kept unchanged in recent quarters, despite a fall in overall market rates.
The Finance Ministry had questioned the 2019-20 interest rate and the 2018-19 interest rate of 8.65 per cent as well, besides the EPFO’s exposure to IL&FS and similar risky entities.