The Employees’ Provident Fund Organisation (EPFO) on Thursday lowered the interest rate on provident fund deposits to 8.50% for FY20 (2019-20) from 8.65% in FY19 (2018-19), Labour Minister Santosh Gangwar said on Thursday.

Highlights:

  • EPFO lowered the interest rate on deposits to 8.50% for FY20.
  • The move will affect the PF deposits of over 6 crore active subscribers.

Salaried employees will get 0.15% lower returns on their provident fund deposits this year with the Employees’ Provident Fund Organisation announcing a 15 basis point reduction in the interest rate on PF deposits in 2019-20 compared to 8.65% in 2018-19 on the back of lower yields on its investments.

The decision was taken following a meeting of the central board of trustees of the EPFO comprising representatives of employees, employers, and governments both at the center and some member states. The move will affect the PF deposits of over 6 crore active subscribers.

Now, the Labour ministry requires the finance ministry’s concurrence on the matter. Since the central government is the guarantor, the finance ministry has to vet the proposal for the EPF interest rate to avoid any liability on account of shortfall in the EPFO income for a fiscal.

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.

The economic slowdown has impacted EPFO’s earnings on debt market instruments including government securities and fixed deposits.

EPFO has an investment of over Rs 18 lakh crore of which barely Rs 4,500 crore has been in DHFL and IL&FS. EPFO invests 85% of its annual accruals in the debt market and 15% in equities through exchange-traded funds. As of March 31, 2019, EPFO has made a cumulative investment of Rs 74,324 crore fetching a return of 14.74%.

Labour minister headed the central board of trustees of EPFO is the apex decision making body of EPFO which manages a corpus of over Rs 12 lakh crore and has an active subscriber base of six lakh.

Also read: COVID-19: Precautions, Dos And Don’ts, Common Misconceptions