Employees' Provident Fund Organisation (EPFO) is expected to credit 8.5 per cent rate of interest in the employees' provident fund (EPF) of about six crore subscribers for 2019-2020. This is to be done in one go by the end of this year.
In September 2020, EPFO had planned on splitting the 8.5 per cent interest into two instalments - 8.15 per cent and 0.35 per cent - in its trustees meet, which was headed by Labour Minister Santosh Gangwar.
Labour Ministry has sent a proposal to the Finance Ministry for agreeing to credit 8.5 per cent rate of interest on EPF for 2019-20 earlier this month, a ministry source told news agency PTI.
"The Ministry of Finance ratification is likely in (a) few days. Thus, the interest is likely to be credited by this month only," PTI reported.
According to the source, the Finance Ministry had also sought clarification on interest rates for the last fiscal year, which were addressed by the Labour Ministry.
Earlier in March 2020, EPFO's top decision-making body - the Central Board of Trustees (CBT) headed by Labour Minister Santosh Gangwar - had approved 8.5 per cent interest rate on the provident funds for 2019-20.
The EPFO had decided to uphold its decision to provide the said rate of interest during a virtual CBT meeting held in September.
"It (8.5 per cent interest) would comprise 8.15 per cent from debt income and balance 0.35 per cent (capital gain) from the sale of ETFs (exchange traded funds) subject to their redemption by December 31, 2020," a statement by the Ministry of Labour said, explaining that this split was zeroed in on with CBT, which then recommended it to the Centre.
The CBT had also recommended accounting capital gains, such as those from sales of exchange traded funds (ETFs), as being exceptional cases for FY2020. As had been planned before, the EPFO will provide 8.15 per cent interest on EPFs right after the approval from the Finance Ministry. The remaining 0.35 per cent rate is to be provided by December 31, after the proposed liquidation of ETFs. The EPFO had planned to liquidate some of its investment in ETFs to enable the 8.5 per cent provision, but could not do so owing to choppy market conditions during the lockdown.
According to the source, it should not be hard to issue the entire 8.5 per cent in one go as benchmark indices are at an all-time high, indicating favourable market conditions.