The government's Employees' Provident Fund Organisation cut the interest rate on provident fund deposits to a seven-year low of 8.5 percent for 2019-20.
The EPF interest rate was 8.65 percent in 2018-19. It stood at 8.55 percent in 2017-18, 8.65 percent in 2016-17, 8.8 percent in 2015-16, 8.75 percent in 2014-15 and 2013-14, and 8.5 percent for 2012-13.
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The rate-cut decision was taken at a meeting of EPFO's apex decision-making body—the Central Board of Trustee. "The EPFO has decided to provide 8.5 percent interest rate on EPF deposits for 2019-20 in the CBT meeting today," Labour Minister Santosh Gangwar said in New Delhi after the meeting.
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EPFO will have a surplus of over Rs 700 crore this fiscal due to this step, he said.
According to a source in the labour ministry, the retirement fund body would have had a surplus of over Rs 300 crore at 8.55 percent for this fiscal. There would have been a deficit if EPFO had provided a rate higher than that.
Now, the labour ministry requires the finance ministry's concurrence on the rate cut. Since the Government of India is the guarantor, the finance ministry has to vet the proposal for 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 savings schemes.
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