NEW DELHI: The Employees’ Provident Fund Organsation (EPFO) on Wednesday decided to pay the interest it owes to salaried employees for FY2019-20 in two installments. The pandemic, according to the organisation, has badly impacted the returns from its investment in the equity market.
The decision was made at a board meeting held on the day, where it was decided that the EPFO would credit 8.15 per cent interest to its subscribers for 2019-20 for now. The promised rate of interest for the year was set at 8.5 per cent.
“The remaining 0.35 per cent will be credited in December after redemption of the EPFO’s equity investments,” said a member of the central board of trustees (CBT) of the EPFO. The proposal is still subject to the approval of the finance ministry, which hasn’t yet given the go-ahead.
As earlier reported, the EPFO is staring at a shortfall of Rs 2,500 crore in FY2019-20 if it gives out interest at the rate of 8.5 per cent.
The decision to make payment in two tranches was taken after the board headed by labour and employment minister Santosh Kumar Gangwar took up the issue during the meeting. Last year, the EPFO had credited returns of 8.65 per cent to its subscribers for the previous financial year (FY2018-19).
According to sources, EPFO’s investments in the equity markets yielded negative returns of -8.3 per cent for the fiscal year FY2019-20, down from 14.7 per cent in the previous fiscal.
The officials said that this was due to the meltdown in the equity markets during March after the lockdown was imposed. The EPFO also received lower returns on its investments in G-Secs.
For the record, EPFO made an investment of Rs 31,501 crore in exchange-traded funds (ETFs) in 2019-20, compared to Rs 27,974 crore invested in the previous fiscal year. However, the CPSE ETF and Bharat-22 ETF yielded returns of -24.36 per cent and -19.73 per cent respectively during the fiscal year.
About 9.5 per cent of EPFO’s investments, roughly Rs 10,000 crore, had gone into these two ETFs. Sources in the finance ministry say that the proposal is yet to be sent formally to the ministry. However, they added that it sees no problem in making the payment in two installments.