The Employees’ Provident Fund Organisation (EPFO) is expected to credit interest rate for 2019-20 for its subscribers by the end of this month. The clearance for the decision is at present pending from the Finance Ministry, after which the retirement fund body will be able to credit it in one go of 8.5 per cent instead of a split of 8.15 per cent and 0.35 per cent proposed earlier, a senior Labour Ministry official said.
“The interest rate of 8.5 per cent should be credited in one go and should happen by the end of this month. We are awaiting approval from the Finance Ministry,” the official said.
The Central Board of Trustees of the EPFO had in September recommended splitting payment of the interest rate of 8.5 per cent recommended for financial year 2019-20 into two parts, citing “exceptional circumstances arising out of Covid-19”. The EPFO had then said that it will credit 8.15 per cent to its over six crore subscribers for the year immediately and give the remaining 0.35.per cent, which is linked to its equity investments, “before December 31”. This, it had said, was subject to redemption of its units invested in exchange-traded funds or ETFs.
At 8.5 per cent, the EPF interest rate is at a seven-year low.
The Finance Ministry has been nudging the EPFO to reduce the rate to sub-8 per cent level in line with the overall interest rate scenario, which is under strain given the economic slowdown. Small savings rates range from 4.0-7.6 per cent.
The Finance Ministry had questioned the 2018-2019 interest rate of 8.65 per cent as well, besides the EPFO’s exposure to IL&FS and similar risky entities.