New Delhi: The Employees' Provident Fund Organisation (EPFO) voted on Saturday to pay 8.1 percent interest on provident fund deposits for the fiscal year 2021-22. The decision was made today during a meeting of EPFO's central board of trustees.
In March of last year, the EPFO Board finalised a recommendation of 8.5 percent interest rate for the prior fiscal year 2020-21. The CBT, which is led by the Union Labour Minister and includes representatives from both the business and employee sides, determines the interest rate proposal. The Finance Ministry then approves the recommendation.
Despite the significant withdrawals caused by Covid's impact on people's financial resources, the EPFO kept the interest rate on PF deposits at 8.5 percent for 2020-21, the same rate as in 2019-20. Following the Covid-19 pandemic, the retirement fund body faced large withdrawals and lesser contributions. The EPFO had settled 56.79 lakh claims worth Rs 14,310.21 crore issued under the advance facility as of December 31.
Over the years, the Finance Ministry has questioned EPFO's relatively high rate, urging it to cut it to a sub-8 percent level in accordance with the general interest rate environment. The EPFO rate remains the highest among all savings options. Small savings rates range from 4% to 7.6% and have been stable in recent quarters, despite a reduction in general market rates.
The Finance Ministry had questioned the 2019-20 interest rate as well as the 8.65 percent interest rate in 2018-19, as well as the EPFO's exposure to IL&FS and other problematic firms.
