PF rate raised marginally to 8.15% for FY23 | The Financial Express

PF rate raised marginally to 8.15% for FY23

Internal calculations indicate that the EPFO would have been left with a surplus of just Rs 113 crore with an 8.2% interest rate.

provident fund, epfo
For 2022-23, the EPFO is projected to have an income of Rs 90,497.57 crore and a principal amount of Rs 11.02 trillion. (IE)

Subscribers of the Employees’ Provident Fund Organisation will get interest of 8.15% on their retirement savings in 2022-23, marginally higher than 8.1% for 2021-22, which was a four-decade low.

The decision was taken on Tuesday at a meeting of the Central Board of Trustees of the EPFO chaired by Union labour and employment minister Bhupender Yadav.

Also read: Understanding Health Insurance: A Beginner’s Guide

“We have been making investments conservatively as we believe the EPFO is the money of the workers. The labour ministry follows the guidelines of the finance ministry. We have a two-fold objective to increase the corpus and to invest it correctly,” Yadav said.

This is the first increase in the interest rate for the EPF since 2018-19 when it was raised to 8.65% from 8.5% previously. However, in terms of the quantum, it is the smallest rate hike since 2015-16 when the rate was increased by a similar five basis points to 8.8% from 8.75% previously.

The EPFO will now send the proposed rate of interest to the finance ministry, which will approve it. Then, it will be notified in the government gazette, following which the EPFO would credit the rate of interest into its 67.8 million subscribers’ accounts. The finance ministry approval typically comes by June.

“The CBT recommended the amount balancing both the growth and surplus fund to have safeguards,” said an official statement, adding that the recommended rate of interest of 8.15% safeguards the surplus as well as guarantees increase income to members. The interest rate would leave the EPFO with a small surplus of Rs 663.91 crore in this fiscal as against a projected deficit of Rs 197.72 crore for last fiscal.

Also read: PAN-Aadhaar Link Due Date Extended Notification: Full Text of What CBDT Said

Internal calculations indicate that the EPFO would have been left with a surplus of just Rs 113 crore with an 8.2% interest rate. It was veering on the side of caution as a projected surplus of nearly Rs 370 crore last fiscal turned into a deficit of Rs 197.72 crore.

For 2022-23, the EPFO is projected to have an income of Rs 90,497.57 crore and a principal amount of Rs 11.02 trillion. This is significantly higher than the income of Rs 77,424.84 crore and principal of Rs 9.56 trillion last fiscal.

“The total income recommended for being distributed is highest till date. The growth in income and the principal amount is respectively more than 16% and 15% as compared to last financial year 2021-22,” the statement further said.

The return is higher compared to similar products such as the public provident fund, which offers an interest rate of 7.1% for the current quarter. Other small saving schemes like the Sukanya Samriddhi Yojana has an interest rate of 7.6%.

Trade union leaders welcomed the partial increase in the rate of return. “It is slightly better than what was announced for 2021-22,” noted AK Padmanabhan, member of the CBT and a leader of the Centre of Indian Trade Unions.

Harbhajan Singh Sidhu, General Secretary, Hind Mazdoor Sabha and member, CBT said the EPF could have announced an interest rate of 8.2% for the fiscal but it would have impacted the surplus.

“An interest rate of 8.15% would cover the risk element and we wanted to be on the safer side,” said KE Raghunathan, member, CBT representing the employers.

The CBT, which is the apex decision making body of the EPFO, also discussed the issue of higher pension following the Supreme Court ruling. “CBT took up the higher pension issue at length. Paragraph 44 directions of the Supreme Court will be fully followed and we have issued the requisite notifications. We are committed to it to ensure that all eligible subscribers will get the benefit,” the minister said.

CBT members stressed that the process must be made simpler and faster so that all eligible members can avail the benefit. According to a status report by the EPFO shared with the CBT, it has received nearly 94,000 applications from members who retired before September 1, 2014 and another about 30,000 applications under the joint option.

As much as 99% of the interest crediting for PF deposits for the fiscal 2021-22 has also been completed. The remaining 1% is pending due to issues with the subscriber’s account, said a source.

EPFO has also set up a five-year plan for upgrading its infrastructure and the board has approved Rs 2,200 crore for it, the minister said. An MoU has also been signed with the National Testing Agency for faster recruitments, which was also approved by the CBT.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 29-03-2023 at 01:40 IST
Exit mobile version