Employee Provident Fund (EPF) interest rate lowered from 8.65% to 8.5% for FY 2019-20

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Employee Provident Fund (EPF) interest rate lowered from 8.65% to 8.5% for FY 2019-20

Employee Provident Fund (EPF) interest rate lowered from 8.65% to 8.5% for FY 2019-20

Bad news for salaried employees as they could face a cut in interest on their provident fund (PF) deposits for FY 2019-20. The Central Board of Trustees of Employees Provident Fund Organisation (EPFO) has recommended interest rate of 8.5%.

The interest rate is a big sentiment booster and any cut may further hit the employee sentiment. This is lower than the 8.65% interest rate given on employee provident fund (EPF) deposits for the previous financial year 2018-19.

The economic slowdown which has impacted EPFO’s earnings on debt market instruments including government securities and fixed deposits.

EPFO has an investment of over Rs 18 lakh crore of which barely Rs 4,500 crore has been in DHFL and IL&FS. EPFO invests 85% of its annual accruals in debt market and 15% in equities through exchange traded funds. As on March 31, 2019, EPFO has made a cumulative investment of Rs 74,324 crore fetching a return of 14.74%.

Labour minister headed central board of trustees of EPFO is the apex decision making body of EPFO which manages a corpus of over Rs 12 lakh crore and has an active subscriber base of six lakh.

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Salaried employees will get 0.15% lower returns on their provident fund deposits this year with the Employees’ Provident Fund Organisation announcing a 15 basis point reduction in the interest rate on PF deposits in 2019-20 compared to 8.65% in 2018-19 on the back of lower yields on its investments.

The decision to this effect was taken at the just conclused central board of trustees meeting of EPFO.

The central board of trustees of the EPFO comprising representatives of employees, employers and governments both at the centre and some member states met on Thursday to take a call on several issues including the much-awaited interest rate for 2019-20.

After the meeting, the labour minister stated that the new EPF Interest Rate would stand at 8.50% rather than 8.65%.

Now, the labour ministry requires the finance ministry’s concurrence on the matter. Since the Government of India is the guarantor, the finance ministry has to vet the proposal for EPF interest rate to avoid any liability on account of shortfall in the EPFO income for a fiscal.

The finance ministry has been nudging the labour ministry for aligning the EPF interest rate with other small saving schemes run by the government like the public provident fund and post office saving schemes.

The EPFO had provided 8.65 per cent rate of interest to its subscribers for 2016-17 and 8.55 per cent in 2017-18. The rate of interest was slightly higher at 8.8 per cent in 2015-16. It had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than 8.5 per cent for 2012-13.

Source: Media

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