The Employees’ Provident Fund Organisation (EPFO) has directed its field offices to credit 8.55 per cent rate of interest for 2017-18, the lowest rate in five years, for around 5 crore of its subscribers.
The Labour and Employment Ministry has conveyed approval of the central government to credit 8.55 per cent rate of interest for 2017-18 into PF accounts of members, according to an order issued by the EPFO to its more than 120 field offices on Friday.
The finance ministry had last month ratified 8.55 per cent rate of interest on EPF for the last fiscal. The finance ministry, however, has raised some concerns about the calculations of the surplus left with the retirement fund body after the payout of the interest rate and settlement of claims, for which the Finance Ministry will continue to hold discussions with the Labour and Employment Ministry.
In February, the Central Board of Trustees of the EPFO had recommended slashing the interest rate for its 5-crore subscribers to a five-year low of 8.55 per cent for 2017-18 from 8.65 per cent in the previous year. The EPF rate has to be ratified by the Finance Ministry.
In March, the Finance Ministry had written to Labour and Employment Ministry questioning the fixation of interest rate of 8.55 per cent for the subscribers of EPFO for 2017-18. In the letter, the Finance Ministry had questioned the sustainability of the interest rate along with raising concerns over the low surplus available with the retirement body after the interest rate payout to its subscribers.
As per EPFO estimates, at a rate of 8.55 per cent, the EPFO will have a surplus of Rs 586 crore. Retaining the previous year’s interest rate of 8.65 per cent would have resulted in a surplus of Rs 48 crore, while an interest rate higher than 8.65 per cent would have resulted in a deficit. The finance ministry has been asking the labour ministry since last three years to bring the EPF interest rate in alignment with other small savings schemes as it continues to be the fixed income instrument with the highest return.