With today’s reduction, the EPF interest rate is lowest since 1977-78, when it stood at 8 per cent.
In March this year, the Employee Provident Fund Organisation (EPFO) had proposed to lower the interest rate on retirement savings for its 6.4 crore subscribers from 8.5 per cent to 8.1 per cent.
The payout, which have now been confirmed by the finance ministry, is in line with the agency’s earnings and will leave it with a surplus of Rs 450 crore during the financial year.
Compared to earnings of 8.5 per cent on the corpus last year, this year’s earnings EPFO has estimated an income of Rs 76,768 crore, which translates into a return of 7.9 per cent, labour minister Bhupendra Yadav had said after a meeting of the EPFO in Guwahati in March.
The government had said that interest payments had been higher due to the buoyant stock markets, which have taken a beating in recent weeks in the wake of the Ukraine war and an expectation of monetary policy tightening in the US and other developed countries.
In March 2020, the EPFO had lowered the interest rate on provident fund deposits to a seven-year low of 8.5 per cent for 2019-20, from 8.65 per cent in 2018-19.
The 8.5 per cent interest rate on EPF deposits for 2020-21 was decided by the Central Board of Trustees (CBT) in March 2021.
It was ratified by the finance ministry in October 2021. Thereafter, the EPFO issued directions to field offices to credit the interest income at 8.5 per cent for 2020-21 into the subscribers’ account.
The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was brought down to 8.5 per cent.
EPFO had provided 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18.
The rate of interest was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than the 8.5 per cent for 2012-13. The rate of interest was 8.25 per cent in 2011-12.
(With inputs from agencies)