The Union government on Friday approved an interest rate of 8.1% on employee provident fund (EPF) deposits for FY22, the lowest in the past four decades, in a decision expected to impact 60 million subscribers.
Earlier in March this year, the Employees’ Provident Fund Organisation (EPFO) had decided to lower the interest on provident fund deposits for 2021-22 to 8.1 percent from 8.5 percent provided in 2020-21.
The labor ministry has conveyed the government’s approval for crediting the interest amount at an 8.1% rate, the Employees Provident Fund Organisation (EPFO) said in an office order. The EPFO would now begin crediting the interest amount to individual EPF accounts.
In March, EPFO proposed to cut the interest rate on PF deposits from 8.5% to 8.1% for FY22. The decision was taken at a meeting of EPFO’s central board of trustees, chaired by labor minister Bhupender Yadav, in Guwahati.
“It is the lowest in years and comes at a time when inflation is very high. It does, hence, go against real social security returns. Ideally, it should have been left unchanged in these times,” said Madan Sabnavis, chief economist at Bank of Baroda.
Interest rate on provident fund has been slashed several times in the past four years. In March 2020, the EPFO had lowered the interest rate on provident fund deposits to a seven-year low of 8.5% for 2019-20, from 8.65% in 2018-19.
The EPF interest rate provided for 2019-20 was the lowest since 2012-13, when it was brought down to 8.5%.
EPFO had provided 8.65% interest rate to its subscribers in 2016-17 and 8.55% in 2017-18.
The rate of interest was slightly higher at 8.8% in 2015-16. It had given 8.75% rate of interest in 2013-14 as well as 2014-15, higher than the 8.5% in 2012-13. The rate was 8.25% in 2011-12.
