The Employees’ Provident Fund Organisation (EPFO) will soon start crediting 8.1% rate of interest for 2021-22 to its members as the finance ministry has ratified the rate proposed by the retirement fund body in March.
In March, the Central Board of Trustees (CBT), the highest decision-making body of the EPFO, decided to lower the interest on provident fund deposits for 2021-22 to an over-four-decade low of 8.1% for its nearly 65 million subscribers. This was the lowest EPF interest state since 1977-78, when it stood at 8%, but still higher than the returns small savers could get under any other fixed-income schemes.
For 2020-21, the interest rate for EPF was set at 8.5%, the same as in the previous fiscal.
“The ministry of labour and employment, government of India, has conveyed the approval of the central government to credit interest @8.1% for the year 2021-22 to the account of each member of the EPF scheme. You are, accordingly, requested to issue necessary instructions to all the concerned for crediting the said interest rate to the member accounts,” additional central PF commissioner (investment) Abhay Ranjan said in a note to heads of EPFO’s zonal and regional offices.
As per the practice, the rate proposed by the CBT needs to be ratified by the finance ministry before the same is credited to individual employees’ provident fund (EPF) accounts, even as the EPFO pays the interest from its own income without depending upon the exchequer.
The ratification came rather little early for 2021-22. For 2020-21, it came around the end of October 2021.
KE Raghunathan, a CBT member representing employers in the tripartite body, lauded the speed at which the interest rate for 2021-22 has been approved by the government.
“It is really appreciable considering the dire needs of funds in the hands of employees and further it will certainly help them meet expenses such as educational needs of their children,” he said.
At 8.1%, EPFO will have to fork out around Rs 76,000 crore as interest to its subscribers for 2021-22, which will enable it to have a marginal surplus of Rs 450 crore. EPFO now receives over Rs 2.1 trilion as subscription annually and invests its accumulated corpus – around Rs 18 trillion now – in debt and equity instruments in the 85:15 ratio.