Bhupender Yadav: ‘EPF interest rate for FY23 will be recommended before year-end’

I have said this earlier and I will like to underline this again that there is no loss of interest to any member of EPFO. Withdrawals made by all EPF members this year have been done with interest as declared. Due to introduction of this new TDS provision, the accounting process had to undergo a major revision, making the exercise more tedious warranting an enhanced level of scrutiny. It was also necessary to make revisions in the passbook of the members, so that it provides entire information to them in a simpler, readable form. It is a fact that credit of interest post introduction of TDS on interest on taxable contribution for EPF was introduced for the first time and the process required new development, testing, debugging and stabilisation of critical elements of the interest processing module of EPFO’s application software.

Till date, around 90 per cent of the contributory establishments have been credited with interest. In fact, this year EPFO has settled more than 3.6 crore claims submitted by members.

Account updation is a comprehensive exercise requiring scrutiny of each individual transaction made in respect of each and every individual member accounts, thus making the entire process very exhaustive.

How many EPF accounts have to be split for taxable and non-taxable contributions to facilitate the tax on EPF contributions above Rs 2.5 lakh which was introduced in FY22?

Post introduction of new TDS provisions, all EPF accounts are now to be maintained into two distinct taxable and non-taxable components, irrespective of the fact whether there has actually been a TDS component for the account based on the contributions of the member. This has led to the exercise being more intensive for contributory members for FY 2021-22 compared to previous years.

Last few years, there were concerns on some of EPFO’s investments pertaining to Reliance Capital, DHFL, IL&FS, Yes Bank, Indiabulls and IDFC. What is the status of these investments?

It would not be appropriate or feasible to offer views on individual investments, but it must be stated that investments which have suffered downgrades in credit ratings or have defaulted in servicing of returns are periodically and closely reviewed. Since various actions, including actions through legal processes, are ongoing in respect of some of the investments, it would be premature to classify and estimate losses against these investments at this stage.

What is your comfort level with respect to the surplus amount in case the EPFO decides on for a rate hike for FY23? When is the Central Board of Trustees meeting expected to determine the rate?

It should be appreciated that the interest is determined based on the contributions received in EPF accounts, withdrawals made by EPF members, income received during the year. Rate will be recommended before the close of the financial year as per the scheme provisions. Hence, it will be taken up in CBT during the concluding month of the financial year.

EPF interest rate was cut to a four-decade low of 8.1 per cent for 2021-22. In a rising interest rate cycle, will the EPF interest rate for 2022-23 be hiked?

EPFO, despite following a conservative approach towards investment, has consistently generated high returns over the last many years which has enabled it to distribute higher interest to its subscribers, through various economic cycles with minimal credit risk. The current rate of interest (8.1%) offered by EPFO to its subscribers is higher when compared to other schemes like Sukanya Samridhi Yojana (7.6%), Public Provident Fund (7.1%), National Savings Certificate (7%). The rate of interest is contingent upon many things including income, overall corpus. EPFO has continuously taken several measures to safeguard the interest of its members. Traditionally, EPFO has been able to give a higher rate of interest on retirement savings in comparison to other available investment options because of its prudent investment policy of investing in long tenor high yielding securities for the past several decades.

Going ahead also, EPFO will adopt policies that are both fiscally prudent and in the best interest of the Shram Jeevis who are powering India’s growth with their efforts.

What are EPFO’s return on investment, in both debt and equity, for FY23? Has the process of appointing new fund managers completed?

It would be premature and speculative to arrive at any figures on returns for FY23 compared to previous financial years. The comparisons will be available at the end of the financial year. The investments of EPFO are handled by a professional ecosystem comprising fund managers, concurrent and regular auditors, depository agents and performance evaluators with strong checks and balances built into the processes. It is largely due to these well-established processes that the EPFO has been able to give comparatively better long-term returns for its subscribers in comparison to other schemes.

As far as the fund managers are concerned, there are no changes as of now.

In July last, there was a proposal to hike investment in equity instruments from 15 per cent now, but was withdrawn in the CBT meeting. Why? Is there any fresh thinking on this?

There are many alternatives depending on market and interest rate conditions and thus, investments in EPFO are always made prudently within the limits prescribed by both the Ministry of Finance and the Ministry of Labour & Employment.

The Finance, Investment and Audit Committee was to be reconstituted after a notice was sent for the same last December but it is still pending. What is the update for it?

I want to clarify that the CBT, its Executive Committee (EC) and the various sub-committees of the CBT and the EC do not cease to be in operation and continue to function till they are re-constituted. In fact, the Finance Investment and Audit Committee (FIAC) continues to be in vogue and has already met on two occasions during the current financial year 2022-23 and has reviewed and taken important decisions.

The Covid-19 pandemic saw EPFO opening up an advance withdrawal facility. How many withdrawals were made during FY21, FY22 and FY23?

In order to mitigate the hardships for its subscribers during Covid pandemic, the Narendra Modi government had introduced a special non-refundable advance in the form of Covid advance for the subscribers to meet urgent cash flow requirements. This advance was in addition to other categories of advances and withdrawal already available to EPF subscribers. Till date, EPFO has settled around 2.16 crore claims under the Covid advance category. In FY 2022-23, till date, EPFO has settled around 3.60 crore claims, of which approximately 63 per cent are advances claims of various types, 11 per cent are final settlement claims, and 26 per cent comprise other categories of claim like pension, insurance, transfer, etc.