Business News | EPFO cuts interest rates to 8.1% for 4 decades
Guwahati (Assam) [India], Mar 12 (ANI): The main decision-making body of the Employees Provident Fund Organization (EPFO), the Central Board of Directors chaired by Union Labor and Employment Minister Bhupendra Yadav, has on Saturday approved an 8.1% interest rate on provident fund (PF) deposits for the 2021-22 financial year. This is the lowest interest rate on PF deposits in over four decades.
Over the past two fiscal years, 2020-21 and 2019-20, PF deposit interest rates have been 8.5%. The interest rate for 2021-22 will be the lowest since 1977-78, when it was 8%.
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“The Central Board has recommended an annual interest rate of 8.10% to be credited on EPF accumulations in members’ accounts for the financial year 2021-22. The interest rate would be officially notified in the official gazette , after which the EPFO would credit the interest rate to the accounts of its subscribers,” the Ministry of Labor and Employment said in a statement.
The Central Board of Directors is EPFO’s supreme decision-making body. It is a tripartite body involving government, workers and employers’ representatives.
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The decision on the interest rate on PF deposits for 2021-22 was taken at the 230th meeting of the Central Board of Directors, EPF, held during AKAM’s signature week in Guwahati.
The union finance ministry will now verify the interest rate recommended by EPFO’s central board and issue a notification.
Interest rates on PF deposits have been significantly reduced over the past six years. In 2015-2016, the interest rate on PF deposits was 8.8%. It was lowered to 8.65% in 2016-2017 and to 8.55% in 2017-2018. In 2018-2019, it was increased to 8.65%. However, in 2019-20 it was again lowered to 8.5%. It remained unchanged in 2020-21.
EPFO, despite a conservative investment approach, has consistently generated high returns over the past few years, enabling it to distribute higher interest to its subscribers, through various economic cycles with risk of minimum credit, said the Department of Labor and Employment.
Traditionally, EPFO has been able to offer a higher interest rate on retirement savings compared to other investment options available due to its conservative investment policy of investing in fixed income securities. long-term and high-yield over the past few decades. This has helped to ensure that returns on EPFO’s investments are higher even when returns have steadily declined over the past decade, the ministry said.
For fiscal year 2022, EPFO has decided to liquidate some of its equity investments and the recommended interest rate is the result of the combined income of interest received on debt investments as well as income earned on equity investments. . This enabled EPFO to provide a higher return to its subscribers and enabled EPFO with a surplus to act as a cushion to provide a higher return in the future as well. There is no overload on the EPFO corpus due to this distribution of income.
Opposition parties criticized the government for lowering interest rates on PF deposits.
Criticizing the move, Congress Party General Secretary and Chief Spokesman Randeep Surjewala said it was an attack on the incomes of millions of workers.
“The income of 84% of people in the country has gone down. Is it right to attack the savings of millions of working people based on the election victory,” Surjewala said in a tweet.
In a letter to Union Finance Minister Nirmala Sitharaman,
MP Rajya Sabha and leader of the Communist Party of India (CPI) Binoy Viswam has written a letter to Union Finance Minister Nirmala Sitharaman urging her to reconsider her decision to cut interest rates on PF deposits.
“I strongly urge you to reconsider this decision and maintain the current interest rate of 8.5%, which in itself requires an increase,” Viswam wrote in the letter to the union’s finance minister. (ANI)
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