Labour Minister Santosh Gangwar on Tuesday said over 6 crore Employees’ Provident Fund Organisation (EPFO) members would get 8.65 per cent interest on their deposits for 2018-19, PTI reported.
“Ahead of the festival season, over 6 crore EPFO subscribers would get 8.65 per cent interest for 2018-19,” PTI quoted Gangwar as saying on the sidelines of a function here.
In a pre-election announcement in February, the Central Board of Trustees (CBT) of the EPFO in February recommended hiking the interest rate for its 6-crore active subscribers to 8.65 per cent for 2018-19 from a five-year low of 8.55 per cent in the previous financial year. The proposal was sent for the concurrence of the finance ministry.
On the delay in notifying the EPF interest rate, the Labour minister said, “Finance Minister (Nirmala Sitharaman) is busy these days. She has the file (proposal for EPF interest rate for 2018-19). She does not disagree on this. The 8.65 per cent rate of interest approved by us would be provided to EPFO subscribers for 2018-19. It should be done in few days.”
Since the EPFO board’s recommendation to hike the interest rate in February, the Labour and Finance ministries have been exchanging missives regarding the sustainability of the rate and the risks associated with the investment exposure of the retirement fund body.
At 8.65 per cent, the estimated surplus of EPFO is Rs 151.67 crore. Retaining the previous year’s interest rate of 8.55 per cent would have resulted in a surplus of Rs 771.37 crore and an interest rate higher than the recommended rate at 8.7 per cent would have resulted in a deficit of Rs 158 crore, as per the estimates.
As per convention, Finance Ministry ratifies the EPF interest rate recommended by the CBT every year, following which it is notified by the Labour Ministry.
The increase in the EPF rate comes at a time when there’s an overall downward rate cycle. The hike in the EPF interest rate will yield an interest rate higher than most small savings instruments, which are linked to yield on government securities.