The union finance ministry has approved the 8.5% interest rate on provident fund (PF) deposit for FY21. So, the Employees’ Provident Fund Organisation (EPFO) will credit the interest in the accounts of more than 60 million beneficiaries in India. Just ahead of Diwali, this a good news for the beneficiaries.
The move is expected to bring some cheer a week ahead of Diwali. Labour secretary Sunil Barthwal confirmed the development to ET. “Approval was received from the finance ministry today. It will be notified as soon as possible,” he said.
The labor ministry has to notify the interest rate for the year before EPFO starts crediting it into the beneficiary account.
The move is likely to leave EPFO with a surplus of Rs 300 crore as compared with the preceding financial year when it had an excess of Rs 1,000 crore. Worth mentioning here is that the retirement fund regulatory body kept the EPF interest rate unchanged for the financial year 2020-21 as there was more withdrawal than deposits due to the Covid-19 pandemic.
After the outbreak of the coronavirus pandemic last year, the EPFO had cut PF interest rate in March 2020 to a seven-year low of 8.5 percent for 2019-20 from 8.65 percent in 2018-19. It is important to note that the interest rate provided for 2019-20 at 8.5 percent was the lowest since 2012-13.
It has been reported that North Block, headquarters of the finance ministry, has shown discomfort over the higher rate of interest declared by EPFO year after year when the rate of interest for other government schemes including public provident fund (PPF) or small saving schemes was much lower.
EPFO had pegged an income of around Rs 70,300 crore in the previous fiscal including around Rs 4,000 crore from selling a portion of its equity investments and Rs 65,000 crore from debt.
Based on this, its central board of trustees, headed by the labour minister, had recommended an interest rate of 8.5% for FY21. EPFO had retained the interest rate on PF deposits for 2020-21 same as 2019-20 despite the huge amount of Covid withdrawals from the retirement fund kitty since the scheme was announced last year.
