Much to the delight of salaried employees, the Employees' Provident Fund Organization (EPFO) Thursday hiked the Employees' Provident Fund (EPF) rate by 0.10 per cent to 8.65 per cent for 2018-19 from 8.55 per cent last year. The rate has been hiked for the first time since 2016. The move to increase the EPF interest rate is set to benefit six crore EPFO subscribers.
The Central Board of Trustees (CBT) revised the EPF interest rates at its meet much against the expectations of a status quo on the same. The move once given a go ahead by the Finance Ministry will be notified by the Labour Ministry.
The CBT has representatives from the government, employers, and trade unions headed by the Labour Ministry. The EPF interest rate announced today is higher than the ones available on government small savings schemes whose returns are benchmarked to the market rates. The fund, which consists retirement savings of over Rs 11 lakh crore, is managed by the EPFO.
The EPFO had kept the interest rate at a five year low of 8.55 per cent in FY18. It had fixed the rate at 8.65 per cent in 2016-17, 8.8 per cent in 2015-16, 8.75 per cent in 2013-14 and 2014-15 and 8.5 per cent in 2012-13.
The move according to experts is in line with a raft of populist announcements made by the Narendra Modi government ahead of Lok Sabha elections in April-May this year. Thursday's rate hike is seen by many as an attempt by the government to woo salaried class as EPF is the mainstay of their saving needs and is one of the most widely-used saving instruments.
The interest rates on small savings instruments such as PPF and NSC are linked to the G-sec yields, whereas the EPF interest rate is decided by the government depending upon the income it generates predominantly through investments in government securities.