EPFO Interest Rate Hike: Central board recommends hiking rate to a 3-year high of 8.25% from 8.15%

EPFO Interest Rate News: Coming ahead of the general elections that are likely to be held in April-May this year, the recommendation to hike the EPF interest rate was taken in the CBT meeting held Saturday.

EPFO Hike: Coming ahead of the general elections that are likely to be held in April-May this year, the recommendation to hike the EPF interest rate was taken in the CBT meeting held Saturday.

EPFO Interest Rate: Coming ahead of the general elections that are likely to be held in April-May this year, the recommendation to hike the EPF interest rate was taken in the CBT meeting held Saturday.

EPFO Interest Rate News: The Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) Saturday recommended a higher interest rate of 8.25 per cent for financial year 2023-24 for its over 29 crore total subscribers, out of which around 6.8 crore are active contributing subscribers. This will be the highest rate of interest for EPF subscribers in the last three years and comes ahead of the Lok Sabha elections that are around the corner.

After maintaining the interest rate at 8.5 per cent both in 2019-20 and 2020-21, the EPFO had cut the interest rate in 2021-22 to 8.1 per cent, the lowest in four decades. It then hiked it marginally to 8.15 per cent in 2022-23.

The Ministry of Labour and Employment will now send the interest rate recommendation of 8.25 per cent for 2023-24 to the Ministry of Finance for ratification. After the ministry’s consent to the interest rate, the EPFO would credit the rate of interest for the previous fiscal to the EPF subscribers.

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Also Read | EPFO unveils FAQs on issues linked to higher pension rollout

With the 8.25 per cent payout to its subscribers, the EPFO is expected to retain a surplus of Rs 278 crore in FY23, a source said. “These are provisional estimates as the financial year is yet to end. But the surplus is seen higher than last year,” EPFO’s Central Provident Fund Commissioner Neelam Shami Rao said.

On Saturday, the Labour and Employment Ministry said the Board has recommended a distribution of “historic income amount of Rs 1,07,000 crore” to EPF members’ accounts on a total principal amount of about Rs 13 lakh crore in 2023-24. This compares with EPF’s income of Rs 91,151.66 crore and Rs 11.02 lakh crore principal amount in the financial year 2022-23.

Also Read | EPFO trustee board meets, discusses progress on higher pension option

The decision to recommend a hike in the EPF interest rate was taken in the 235th CBT meeting chaired by Union Labour and Employment Minister Bhupender Yadav on Saturday. Though there was no official announcement immediately after the meeting, Yadav posted on social media platform X. “The 235th meeting of the Central Board of Trustees, EPFO, today has recommended 8.25 per cent as rate of interest on Employees’ Provident Fund deposits for 2023-24,” he said.

The Labour and Employment Ministry said the recommended interest rate will be notified after approval of the Ministry of Finance. “This interest rate will be officially notified in the government gazette after approval by the Ministry of Finance. Subsequently, EPFO will credit the approved rate of interest into its subscribers’ accounts,” a statement by the ministry said.

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In 2022-23, the surplus was estimated to be Rs 663.91 crore. Before that while recommending the rate of interest for FY 2021-22 at 8.1 per cent, EPFO had projected a surplus of Rs 449.34 crore but, in fact, had ended up with a deficit of Rs 197.72 crore, which was flagged by the Finance Ministry last year.

Also Read | EPFO to stop claims made through Paytm Payments Bank

On July 3, 2023, when the interest rate proposal for 2022-23 was sent to the Finance Ministry for its approval through a letter written to Economic Affairs Secretary Ajay Seth by Labour and Employment Secretary Arti Ahuja, the key point of discussion was the surplus and deficit levels of the retirement fund body. Flagging the deficit for 2021-22, the Finance Ministry had suggested that the high EPF interest rates need to be looked at along with an advice to the EPFO to make the interest rate recommendations of CBT public only after the approval of the Finance Ministry.

Explained

Record income, higher surplus

The higher 8.25% interest rate for this year is mainly because EPFO expects to retain a higher surplus. This could probably be because of record high incomes due to lower-than-expected claims.

The gains in EPFO’s books have come mainly on account of lower revised estimates for payment towards claims in 2023-24. As per the EPFO’s financial estimates viewed by The Indian Express that were shared in the CBT meeting, payment towards settlement of claims was estimated to rise 19.5 per cent to Rs 62,178.78 crore for 2023-24 from the actual amount of Rs 52,034.75 crore in 2022-23.

However, the retirement fund body has now revised the amount likely to be paid towards settlement of claims to Rs 57,238.22 crore for 2023-24, which is about 8 per cent lower than the budgeted estimate and about 10 per cent higher than the actual amount seen in FY23.

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Similarly, the amount likely to be paid towards advances has now been revised lower to Rs 65,754.17 crore in 2023-24 from the budget estimate of Rs 70,748.65 crore. The amount for advances was at Rs 59,776.52 crore in 2022-23. It is estimated to increase to Rs 72,329.59 crore in 2024-25.

The sustainability of the high interest rates announced by the EPFO have been questioned several times by the Finance Ministry in the last few years. The Finance Ministry has nudged the EPFO to reduce the interest rate in line with the overall interest rate scenario as it continues to offer the highest interest rate among other saving instruments.

EPFO interest rates from 2010

2010-11 9.50%
2011-12 8.25%
2012-13 8.50%
2013-14 8.75%
2014-15 8.75%
2015-16 8.80%
2016-17 8.65%
2017-18 8.55%
2018-19 8.65%
2019-20 8.5%
2020-21 8.5%
2021-22 8.1%
2022-23 8.15%
2023-24* 8.25%

*as recommended by CBT, to be approved by finance Ministry

Aanchal Magazine

Aanchal Magazine is Senior Assistant Editor with The Indian Express and reports on the macro economy and fiscal policy, with a special focus on economic science, labour trends, taxation and revenue metrics. With over 13 years of newsroom experience, she has also reported in detail on macroeconomic data such as trends and policy actions related to inflation, GDP growth and fiscal arithmetic. Interested in the history of her homeland, Kashmir, she likes to read about its culture and tradition in her spare time, along with trying to map the journeys of displacement from there. ... Read More

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