Employees' Provident Fund Organisation (EPFO) is considering slashing the interest rates on provident fund by 15 basis points. If that follows through, employees would face a cut in interest in their PF this year. Provident fund deposits yielded 8.65 per cent in FY19. After the cut, the interest rates on PF deposits would drop to 8.5 per cent.
According to a report in The Economic Times, the issue would be taken up at the central board of trustees (CBT) meeting of the EPFO on March 5. The slash in interest rates would depend on the earnings of the EPFO. The Finance Investment and Audit Committee (FIAC) would take the final call before the CBT meeting.
This cut comes as the retirement fund body might struggle to keep the interest rate unchanged this fiscal, as mentioned in the daily. Earnings on long-term fixed deposits, bonds and government securities are down 50-80 basis points over the past year.
The EPFO had about Rs 4,500 crore of investments in Dewan Housing Finance Corp Ltd (DHFL) and Infrastructure Leasing & Financial Services (IL&FS). DHFL is undergoing bankruptcy resolution and IL&FS is undergoing a rescue programme overseen by the government. The EPFO has Rs 18 lakh crore of investments. It also invests in the debt market and equities through ETFs (Exchange-Traded Funds). The EPFO had a cumulative investment of Rs 74,324 crore in equities at the end of March last year, yielding a return of 14.74 per cent.
The government would also, however, keep in mind not to make workers unhappy with lower PF rates.