Key Highlights
EPFO had cut FY20 interest on PF deposits to 8.5% from 8.65% during 2018-19
Current EPF rate are lowest since 2012-13 at 8.5%
These rates stood at 8.65% in 2016-17 and 8.55% in 2017-18
Investors breathed a sigh of relief after the government’s retirement fund body Employees’ Provident Fund Organisation (EPFO) decided to retain an 8.5% interest rate on provident fund (PF) deposits for the current financial year (FY21).
The Central Board of Trustees (CBT), which is the governing body of EPFO met in Srinagar on Thursday and cleared 8.5% interest rate after taking into account earnings and financial position. The news comes as a reprieve to EPFO’s five crore active subscribers who look at PF deposits as their piggy bank of the last resort.
The rate on PF deposits for the year 2020-21 were kept unchanged despite widespread speculation that in view of the overall low-interest rate regime, the government’s higher repayment burden after increased borrowing might pressure CBT into further slashing interest rates.
The year 2020-21 saw more withdrawals and lesser contribution by members amid the coronavirus pandemic in the current financial year.
The Ministry of Labour headed body said, for FY 2021, EPFO decided to liquidate investments in and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realized from equity investment. This has enabled EPFO to provide higher return to its subscribers and still allowing EPFO with healthy surplus to act as a cushion for providing higher return in future also.
The interest payout for FY20 made headlines owing to delays in crediting the same to subscribers’ accounts which was attributed to delay in the sale of equity. As many as four million EPF subscribers could not receive when the payout was actually made owing to KYC mismatch.
BNP Financial Solutions
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