Employees' Provident Fund Organisation (EPFO) has reduced interest rates to the lowest in more than 40 years for the current financial year.
The retirement fund body had decided to reduce the interest on provident fund (PF) deposits for 2021-22 to 8.1 per cent for the previous fiscal, 2020-21.
Finance Minister Nirmala Sitharaman on Monday asserted that the proposed 8.1 per cent interest rate on employees' provident fund is dictated by the realties of the current times.Ms Sitharaman said the proposed 8.1 per cent interest rate on employees' provident fund is better than interest rates offered by other small savings schemes, and the revision is dictated by the realties of the current times.The EPFO's central board takes a call on interest rate on provident fund deposits, and it is the board that has proposed cutting PF rate to 8.1 per cent for FY2021-22, the finance minister said in her reply to a discussion on Appropriation Bills in the Rajya Sabha.It is a decision taken by the EPFO Central Board which has a wide spectrum of representatives in it.
The EPFO has taken a call to keep the rate at 8.1 per cent, whereas rates offered by other schemes including Sukanya Samriddhi Yojana (7.6 per cent), Senior Citizen saving scheme (7.4 per cent) and PPF (7.1 per cent) are much lower, she said."The fact remains these are rates which are prevailing today, and it (EPFO interest rate) is still higher than the rest," Ms Sitharaman said adding that EPFO's rates had remained unchanged for 40 years and the revision now reflected "today's realities".The Finance Ministry will now vet the interest rate recommended by the CBT and issue notification.The decision will impact around five crore PF subscribers.
The rate was kept unchanged in 2020-21.Labour Minister Bhupender Yadav justified the retirement body's decision by citing the prevailing international and market situation.EPFO despite following a conservative approach towards investment, has consistently generated high returns over the last many years which has enabled it to distribute higher interest to its subscribers, through various economic cycles with minimal credit risk, the Ministry of Labour and Employment stated.In 2019-20, EPFO had cut the rate on PF deposits to a seven-year low of 8.5 per cent for 2019-20 from 8.65 per cent provided for 2018-19.