Interest rate on provident fund cut to four-decade low of 8.1 pc

Interest rate on employees provident fund deposits on Saturday was proposed to be cut to a fourdecade low of 81 per cent for the current 202122 fiscal from 85 per cent in the previous year sources saidThis is the lowest interest rate since 197778 on deposits that employees make towards their retirement fund Interest rate on employees provident fund that year stood at 8 per centThe interest rate for the current fiscal year ending March 31 was set by the retirement fund body EPFO for its about 5 crore subscribersThe Employees Provident Fund Organisations EPFOs apex decision making body Central Board of Trustees has decided to provide 81 per cent rate of interest on Employees Provident Fund EPF for 202122 in its meeting held on Saturday a source saidThe EPFO paid 85 per cent interest rate to its subscribers in 202021 the same as in the previous year The EPF rate was 865 per cent in 201819 and 855 per cent in 201718Provident fund savings are mandatory under the Employees Provident Funds and Miscellaneous Provisions Act 1952 At least 12 per cent of an employees basic salary is compulsorily deducted to be saved in provident fund while an employer cocontributes an equal amountSources added that interest rates are fixed based on the earnings of the retirement fund body on the deposits it has While the corpus has gone up by 13 per cent interest income is up only 8 per centThe Covid19 pandemic has strained EPFOs earnings EPFO delayed payments for 201920 and paid the interest in two installments deriving from two sources of its investments 815 per cent from debt investments and 035 per cent from the equity portfolioPressured earnings forced the retirement fund manager to revise down the interest rates payable to depositors in some preceding yearsFor instance during 201718 the organisation paid 855 per cent interest rate In 201617 the interest rate was higher at 865 per centEPFO has a surplus of around Rs 450 crore after paying at a rate of 81 per cent Employee representatives sought higher interest rates but the Central Board of Trustees CBT settled for 81 per centA member of the CBT said the interest rate setting reflects the state of the Indian economy and the difficulty the EPFO faces in generating returns from a sizeable corpusThe EPFO invests 85 per cent of its annual accruals in debt instruments including government securities and bonds and 15 per cent in equity through ETFs The earnings from both debt and equity are used to calculate the interest paymentThe EPFO has liquidated Rs 12785 crore worth equity investments in exchangetraded funds ETFs and will use capital gains of around Rs 5529 crore from it for the FY22 EPF interest payoutThe 85 per cent interest rate on EPF deposits for 202021 was decided by the CBT in March 2021It was ratified by the finance ministry in October 2021 and thereafter EPFO issued directions to field offices to credit the interest income at 85 per cent for 202021 into the subscribers accountsNow after the CBT decision on Saturday the interest rate on EPF deposits for 202122 will be sent to the Ministry of Finance for concurrence EPFO provides the rate of interest only after it is ratified by the government through the finance ministryIn March 2020 EPFO had lowered the interest rate on provident fund deposits to a sevenyear low of 85 per cent for 201920 from 865 per cent provided for 201819The EPF interest rate provided for 201920 was the lowest since 201213 when it was brought down to 85 per centEPFO had provided 865 per cent interest rate to its subscribers in 201617 and 855 per cent in 201718The rate of interest was slightly higher at 88 per cent in 201516 It had given 875 per cent rate of interest in 201314 as well as 201415 higher than the 85 per cent for 201213The rate of interest was 825 per cent in 201112This story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever