NEW DELHI: The Employees’ Provident Fund Organisation (EPFO) on Saturday proposed to cut the interest rate on provident fund deposits from 8.5% to 8.1% for 2021-22. This is the lowest interest rate on deposits in the past four decades, and is set to impact 60 million subscribers. The decision was taken at the meeting of EPFO's central board of trustees, chaired by Labour Minister Bhupender Yadav in Guwahati.
Addressing the board meting, Bhupinder Yadav said, “I feel good to announce 8.1% interest rate on EPF savings for 2021-22 at a time when a 10-year FD with SBI yields just around 5.4% returns, while returns on savings instruments like the PPF are in the range of 6.8% to 7.1%.”
The interest rate on EPFO was slashed several times in the past four years. In 2019-20, the interest rate on provident fund deposit was 8.5%, while in 2018-19 it was 8.65% and 8.55% in 2017-18. The last time when the EPF rate was even closer to 8.1 % was in 2011-12 when the retirement fund body paid 8.25-8.5% rate to its subscribers.
Now the board’s recommendation will be sent to the finance ministry for approval. Once the ministry approves it, EPFO will direct its field offices to credit the interest income calculated at the new rate of 8.1% for 2021-22 in the subscribers' accounts.
The EPFO manages retirement savings of nearly R 16 lakh crore belonging largely to formal sector workers. The EPFO has liquidated R12,785 crore worth equity investments in exchange-traded funds, and will use capital gains of around R5,529 crore from the amount for FY22 EPF interest payout. It still will have a surplus of around R450 crore after paying at a rate of 8.1%.