EPFO Fixes 8.15% Interest Rate On Employees' Provident Fund For 2022-23
Retirement fund body EPFO fixed 8.15% rate of interest on employees’ provident fund (EPF) deposits for 2022-23 at its meeting on Tuesday.
The Central Board of Trustees of the Employee Provident Fund Organisation has fixed a rate of 8.15% to be paid to subscribers for the financial year ending March 2023, a 5 basis point increase from the previous year, sources have told PTI.
The decision comes after a two-day board meeting that began on Monday. A basis point is one hundredth of a percentage point.
The employee provident fund is a major retirement savings instrument used by over five crore subscribers in the country. It was widely speculated that the board would recommend a higher rate than the 8.1% that was set for the previous financial year.
In March 2022, the EPFO had lowered the interest on EPF for 2021-22 to an over four-decade low of 8.1%, down from 8.5% in 2020-21.
The EPFO will now send its recommendation to the Ministry of Finance and the rates will come into effect once the government approves.
The decision to cut the rate offered in the previous financial year came on the back of rate cuts that were conducted by the Reserve Bank of India to spur the economy during the Covid-19 pandemic-induced slowdown.
Since May last year, though, the central bank has raised its policy rate by 250 bps, leading to a rise in yields on government securities.
The EPFO invests 85% of its corpus in debt, most of which is issued by the central government. The remaining 15% is invested in the equity market and is directed towards exchange traded funds that invest in the Nifty 50 index.
The Central Board of Trustees of the EPFO is also believed to be contemplating further increasing the limit for investments into equity instruments, in line with global practices.
The Labour Ministry said the recommended rate of interest of 8.15% safeguards the surplus as well as guarantees increased income to members. "In fact, the rate of interest at 8.15 % and the surplus of 663.91 Crores is higher than the last year."
The board’s recommendation involves distribution of more than Rs 90,000 crore in the members’ account on the total principal amount of about Rs 11 lakh crore. This was Rs 77,424.8 crore and Rs 9.56 lakh crore, respectively, in financial year 2021-22.