Economy

EPFO plans marginal hike in interest rates this fiscal

| Updated on: Dec 22, 2015

In discussion with Finance Ministry

The Employees’ Provident Fund Organisation is considering a marginal hike in the interest rate on provident fund deposits to about 8.9 per cent this fiscal from the return of 8.75 per cent in 2014-15. 

 However, the Finance Ministry that is currently reviewing the rate structure on small saving schemes is keen that the retirement body should hold off a formal decision on its interest payout for this year. 

According to two officials familiar with the development, the Finance Ministry feels that the return on provident fund should be similar to that of the small savings schemes, which itself is likely to see a cut by January.

At present, small savings schemes such as the public provident fund offers an interest rate of 8.7 per cent while the recently launched Sukanya Samriddhi Account has an even higher return of 9.2 per cent. The EPFO has retained its interest rate at 8.75 per cent for 2013-14 and 2014-15 from 8.5 per cent in 2012-13.

 The ministries of Labour and Finance are understood to be in discussion over the EPF rate proposal for 2015-16 and a decision will be taken by next month by when a new interest rate regime for small savings is also likely to be finalised.

The EPFO had sent its income projections for the current fiscal to the Labour Ministry and had suggested there was scope for a higher return on PF deposits. The Labour Ministry has taken up the proposal with the Finance Ministry, sources said.

 A formal decision based on the income projections would be taken by the EPFO’s apex decision making committee — the Central Board of Trustees that is chaired by Labour Minister Bandaru Dattatreya.

The Finance Ministry had in a separate exercise begun a review of small savings schemes such as post office deposits and public provident funds in September this year after banks had complained that the high rates on such schemes made fixed deposits unattractive to investors and also make it difficult to cut lending rates.

Published on January 22, 2018

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