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EPFO trustees to raise delay in ratification of EPF interest rate for FY20

The EPF interest rate can be credited into the accounts of over six crore subscribers of the EPFO for a particular financial year only after the finance ministry's nod

twitter-logoPTI | September 8, 2020 | Updated 07:49 IST
EPFO trustees to raise delay in ratification of EPF interest rate for FY20

The issue of delay in ratification of 8.5 percent rate of interest for employees provident fund (EPF) for 2019-20 is likely to be raised in the meeting of retirement fund body EPFO scheduled on Wednesday.

The Employees' Provident Fund Organisation's (EPFO's) apex decision making body Central Board of Trustees (CBT), headed by Labour Minister Santosh Gangwar, had on March 5 this year lowered the EPF interest rate by 0.15 percentage points to a seven-year low of 8.5 percent for 2019-20.

Later, the CBT's decision was communicated to the finance ministry for concurrence. The EPF interest rate can be credited into the accounts of over six crore subscribers of the EPFO for a particular financial year only after the finance ministry's nod.

A CBT member, on the condition of anonymity, told PTI, "We would raise the issue of delay in government ratification of interest rate announced by the CBT in March. It is not listed on the agenda for the meeting scheduled on September 9, but we can raise any issue with the permission of the chair." The member explained, "The delay is also affecting the EPFO because it is settling superannuation and other EPF withdrawal cases at a higher rate of 8.65 percent (provided for 2018-19)."

Also read: 12 lakh EPFO members withdraw Rs 3,360 cr retirement savings during lockdown: FM

As per practice, the EPFO settles an account at the latest ratified rate of interest available. Thus, it is taking a hit of 0.15 percentage points, the member said. Meanwhile, speculation is rife that the EPFO may seek CBT nod to liquidate some investments in exchange traded funds (ETFs) to provide the 8.5 percent interest rate for 2019-20.

However, another trustee told PTI, "There is no such proposal listed on the agenda of the CBT meeting to sell part of the ETF investments to make up for the deficit to provide 8.5 percent rate of interest for last fiscal. There are speculations that there is a deficit of 0.35 percent on payment of 8.5 percent... but there is no information about this in the agenda of the CBT meeting provided to us."

The EPF interest rate announced for 2019-20 was the lowest since 2012-13, when it stood at 8.5 percent. The rate of interest for 2018-19 was 8.65 percent. The EPFO had provided 8.65 percent interest rate to its subscribers for 2016-17 and 8.55 percent in 2017-18. The rate of interest was slightly higher at 8.8 percent in 2015-16. It had given 8.75 percent rate of interest in 2013-14 as well as 2014-15.

The finance ministry has been nudging the labour ministry for aligning the EPF interest rate with other small saving schemes run by the government, like the public provident fund and post office saving schemes.

Also read: Infosys, HCL, TCS employees availing EPF advances the most

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