The Employees’ Provident Fund Organisation (EPFO) interest rate on deposits is set to fall to 8.1% for 2021-22, 0.4% lower than the 8.5% rate credited to EPF members’ accounts in the last two years and the lowest rate in several years.
The PF body’s Central Board of Trustees (CBT), chaired by Labour and Employment Minister Bhupender Yadav, is learnt to have recommended the 8.1% rate for the year at its meeting at its meeting in Guwahati on Saturday. The EPFO is the country’s largest retirement fund and the second largest non-banking financial institution with a corpus of about ₹16 lakh crore.
The proposed rate will have to be ratified by the Finance Ministry before it is added to the balance of EPF account holders and usually, the PF accounts are credited with the annual returns with a significant time lag after the year in question has concluded.
The cut in the EPF rate, at a time when inflation is resurging, could attract criticism from central trade unions that had opposed the decision to cut the rate from 8.65% in 2018-19 to 8.5% in 2019-20.
Mr. Yadav said he feels good to announce the 8.1% interest rate on EPF savings for 2021-22 at a time when a 10-year fixed deposit with the State Bank of India yields just around 5.4% returns, while returns on savings instruments like the Public Provident Fund are in the range of 6.8% to 7.1%.
“This year, our board, keeping the international situation and market volatility in mind, has opted to recommend a stable return as we can’t invest in high risk instruments. We will still have a surplus of ₹450 crore… The Central Board of Trustees’ recommendation has been made keeping the safety of minds as a priority and we will look for more attractive investment avenues going forward,” he said after the conclusion of the board meeting in Guwahati.
The EPFO’s income from investments this year stood at ₹76,768 crore from about ₹70,000 crore in 2020-21, when it had paid out 8.5% to EPF account holders. The EPF corpus went up during the year from ₹8.29 lakh crore to ₹9.42 lakh crore.
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