Govt notifies 8.65% rate of interest for over 60 mn EPFO subscribers: Report
The Central Board of Trustees had approved 8.65% interest rate for FY19 on 21 February this year EPFO manages ₹11 trillion retirement corpus
New Delhi: The government on Wednesday approved 8.65% interest rate on employees provident fund for 2018-19, which will now be credited into the accounts of over 60 million subscribers of retirement fund body EPFO, PTI quoted a source on Thursday.
The EPFO has been settling EPF withdrawal claims at 8.55% interest rate, approved for 2017-18. Now, the EPFO will settle accounts on higher rate of 8.65% for 2018-19.
Last month, the Labour Minister Santosh Gangwar had said that the Labour Ministry will soon notify 8.65% rate of interest on Employees' Provident Fund (EPF) for 2018-19 as the Finance Ministry does not disagree on this rate.
"The finance ministry does not disagree with 8.65% interest on EPF for 2018-19. I believe that it will soon be notified," Gangwar had said on the sidelines of a FICCI meet last month.
Earlier this year, the EPFO's (Employees' Provident Fund Organisation) apex decision-making body Central Board of Trustees, headed by the Labour Minister, had decided to raise the interest rate on EPF to 8.65% for the year 2018-19, the first increase in the past three years.
While the EPFO board decided to pay 8.65% interest rate to its subscribers for 2018-19 in February 2019, it has not credited this to their account till date. While the retirement savings body has been saying that they are awaiting a formal approval from the finance ministry, such a delay adversely impacts the return on deposits, Mint reported on Thursday.
As per The EPF Act of 1952, interest is credited to the member's account on monthly running balances with effect from the last day of each year. It means, the interest for the financial year should, in practice, get credited to EPFO subscribers account on 31 March.
Till the time interest is credited to the account, the amount will not get compound interest. So, if a subscriber has ₹1 million deposit in his EPF account, he or she will not get the benefit of compound interest of ₹86,500 for half a year, which should have got credited to his or her account on 31 March, 2019.
On the delay in notifying EPF interest rate, the minister had said, "Finance Minister (Nirmala Sitharaman) is busy these days. She has the file (proposal for EPF interest rate for 2018-19). She does not disagree on this. The 8.65% rate of interest approved by us would be provided to EPFO subscribers for 2018-19. It should be done in few days."
EPFO manages ₹11 trillion retirement corpus and has an active subscriber base of 60 million.
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