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EPFO hikes interest rate on PF deposits for FY23 to 8.15%
The new rate is a marginal increase over the previous year and comes amid interest rate increases in the financial system following successive rate hikes by the Reserve Bank of India and a higher surplus with EPFO this year
India’s state-run retirement fund manager raised the interest rate on employees’ provident fund to 8.15% for FY23, a development that will benefit more than 60 million subscribers of the Employees’ Provident Fund Organization (EPFO).
The new rate is a marginal increase over the previous year and comes amid interest rate increases in the financial system following successive rate hikes by the Reserve Bank of India and a higher surplus with EPFO this year.
Nonetheless, the interest rate on employees’ provident fund (EPF) savings remains the highest in the small savings category, where the government has modestly raised rates for the March quarter. The most attractive rate under the small savings scheme is 8% for the senior citizens’ savings plan.
In FY22, EPFO slashed the interest rate to a four-decade low of 8.10% from 8.5% in the previous year.
The central board of trustees (CBT), the apex decision-making body of EPFO, headed by Union labour minister Bhupender Yadav, recommended an 8.15% annual interest rate to be credited on EPF accumulations in members’ accounts for the FY23, a labour ministry statement said.
The interest rate would be officially notified in the government gazette after approval of the finance ministry, following which EPFO would credit the rate of interest into its subscribers’ accounts, the statement added.
The recommended rate of interest of 8.15% safeguards the surplus as well as guarantees increased income to members, the labour ministry said, adding that the rate of interest at 8.15 % and the surplus of ₹663.91 crore in FY23 is higher than the last year.
According to EPFO’s income projection, the body would have had a surplus of ₹112.78 crore by providing an 8.2% interest rate on EPF for FY23. There would have been a deficit of ₹438.34 crore at 8.25%.
The CBT’s recommendation involves the distribution of more than ₹90,000 crore to members’ accounts on the total principal amount of about ₹11 trillion, which was ₹77,425 crore and ₹9.56 trillion, respectively, in FY22. The total income recommended for being distributed this year is the highest to date. The growth in income and the principal amount is, respectively, more than 16% and 15% compared to FY22.
Over the years, EPFO has been able to distribute higher income to its members through various economic cycles with minimal credit risk. Considering the credit profile of the EPFO investment, the interest rate of EPFO is higher than other comparable investment avenues available for subscribers.
EPFO has consistently followed a prudent and balanced approach towards investment, putting the highest emphasis on the safety and preservation of principal with an approach of caution and growth, the statement said.
EPFO has maintained and provided its subscribers with a high assured interest rate even during periods of volatility in equity and capital markets.
In March 2020, just when the pandemic hit the country, EPFO lowered the interest rate on provident fund deposits to a seven-year low of 8.5% for FY20 from 8.65% in the previous year.
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First Published:28 Mar 2023, 10:47 PM IST
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