NEW DELHI: Amid weak market conditions and falling interest rates, Employees Provident Fund Organisation (EPFO) on Monday recommended retaining the interest rate on retirement savings accumulated by nearly 31 crore unchanged at 8. 25% during the current financial year.
This is the third consecutive year that the social security organisation has kept the rate unchanged, after raising it in 2023-24 from 8.15% in 2022-23. In 2021-22, the interest rate plunged to a four-decade low of 8.1%.
“EPFO has maintained strong financial discipline, ensuring stable and competitive returns without straining the interest account. It benefits crores of workers by strengthening their retirement security,” labour ministry said in a statement.
The decision, taken at a meeting of the central board of trustees (CBT) chaired by labour minister Mansukh Mandaviya, came ahead of crucial assembly elections in West Bengal, Tamil Nadu, Kerala and Assam. The rate recommended by EPFO’s top decision-making body will need to be ratified by the finance ministry before subscribers can get the interest income into their account.
“EPFO’s aim is clear, as it remains committed to safeguard member contributions from market volatility and delivering prudent, sustainable, and attractive returns compared to other similar investment avenues.
For this purpose, IIM Kozhikode has also been asked to look into the possibility of creating an interest stabilisation reserve, which will help us deliver consistent returns in case of volatility,” an official told ToI.
The social security organisation has nearly 7.5 crore active members and a corpus of nearly Rs 30 lakh crore, which is invested in government securities, stocks and corporate bonds. As of Dec 31, it had invested nearly 88% in govt bonds and 10.6% in equities, via exchange traded funds.
Between April and Feb of the current fiscal year, EPFO’s income was estimated at over Rs 1.4 lakh crore. At the proposed interest rate, the income deficit was estimated at Rs 944 crore, which will be offset against the previous year’s surplus of Rs 5,480 crore, said board members. “Measures are in pipeline to augment the earnings of the fund and create consistency for uniform interest payout in the future years,” employer representative in the CBT Vineet Nahata told ToI.
Besides, the trustees also approved a one-time amnesty scheme to address compliance issues arising from income tax–recognized trusts that are yet to be covered or granted exemption under the EPF Act, along with a new simplified SOP on the exemption process. The proposed scheme seeks to bring establishments and trusts into compliance within a defined six-month period.
