The cut in the interest rate of employee’s provident fund (EPF) has hit a four decade low of 8.1 per cent for the fiscal year 2021-22. The interest rate has come down from 8.5 which was recommended for the fiscal year 2020-21.
This is the lowest interest on employee’s provident fund since 1977-78 on the deposits the employees contribute to their retirement. In 1977-78, the interest on EPF was set at 8 per cent.
The rate was decided by the Central Board of Trustees (CBT) in a meeting chaired by Union labour and employment minister Bhupendra Yadav in Guwahati, the labour ministry said in a statement to media. CBT’s recommendation will now be sent to the Union Finance Ministry and will be notified once it is approved by them.
As per the labour ministry, the interest rate would be notified in the government gazette, post which the Employee Provident Fund Office (EPFO) will credit the interest rate amount to its subscribers account.
The interest rate is decided upon the earnings of returning the government makes on the retirement funds. On one hand the corpus has gone up by 13 per cent, on the other the interest income is only up eight per cent.
Though the labour ministry did not comment on why the EPF interest rate has been reduced but It said despite following a conservative approach towards investment, EPFO 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.