For the second consecutive year, over four crore subscribers of the Employees Provident Fund Organisation (EPFO) will continue to get 8.65 per cent rate of interest in their accounts, Financial Express reported.
Labour minister Bandaru Dattatreya said, "It is very difficult to speak on the interest rate for the current fiscal. But I hope the 8.65% rate could be maintained".
Dattatreya is also chairing the Central Board of Trustees (CBT), the highest decision-making body of the Employees' Provident Fund Organisation (EPFO).
Returns on savings at 8.65% is lowest in four years. However, it still does not impact its status of the most attractive fixed-income investment option.
Last month, the Finance Ministry permitted the Labour Ministry to go ahead with 8.65 per cent rate of interest on employees' provident fund for 2016-17, which will benefit over four crore EPFO members.
The Finance Ministry in its communication to the Labour Ministry has, however, put a rider that the interest rate should not result in a deficit for the retirement fund. This will enable the Labour Ministry to provide 8.65 per cent rate as decided by the Employees' Provident Fund Organisation (EPFO) trustees.
According to EPFO estimates, the fund will see a surplus after providing 8.65 per cent interest rate for the last fiscal.
A reluctant Finance Ministry had been nudging the Labour Ministry to lower the EPF rate to below 8.65 per cent as approved by the EPFO trustees in December last year.
"The Finance Ministry in its recommendation to the Labour Ministry said it is up to the latter to decide on what interest rate should be given. However, it should be ensured that there should not be any deficit to the fund," according to a PTI source.
"The Finance Ministry had earlier suggested an EPF rate slightly lower than approved by the trustees as it wanted the interest to be aligned with the rates of small savings," added the source.
The Finance Ministry had last year also decided to lower the EPF interest rate of 8.8 per cent for 2015-16, decided by the CBT, to 8.7 per cent. The decision had drawn flak from all quarters forcing the government to uphold 8.8 per cent.