EPFO cuts interest rate from 8.5% to 8.1%

I Our Bureau

New Delhi, March 12

Dismissing opposition from Central Trade Unions, the Central Board of Trustees (CBT) of the Employees Provident Fund Organisation (EPFO) on Satuday decided to recommend to the Finance Ministry that the interest on provident fund deposits could be reduced to 8.1 per cent for the current financial year from 8.5 per cent of the last fiscal. The rate was described as the lowest in the last several decades years.

The Central Board recommended 8.10 per cent annual rate of interest to be credited on EPF accumulations in members’ accounts for the 2021-22. The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into its subscribers’ accounts, the Labour Ministry said in a release.

Addressing reporters in Guwahati, Union Labour Minister Bhupender Yadav said there is an assurance to workers that their money will be safe with the EPFO. He said the EPFO has ₹ 8.29 lakh crore as pension fund and ₹ 70,457 crore was distributed to the subscribers as interest at the rate of 8.5 per cent.

“This year, the amount of interest will be ₹ 76,768 crore at the rate of 7.9 per cent. The volume of the fund has also increased, so are the contributors,” he said. Justifying the cut in interest rate, Yadav said SBI’s interest rate on Fixed Deposits is 5.45 per cent. “In other small saving schemes such as the PPF, the interest rate is 6.8 to 7.1 per cent. So this time, we considered the international situation and the situation in equity markets. We will have to consider the interest rate and the social security together. We cannot opt for high risk instruments. This fund is essentially for social security. That is the reason why we recommended an interest rate of 8.1 per cent,” Yadav said. He added that the EPFO’s surplus will be 450 crore, which is close to the calculations of the CBT. He added that the basis of the recommendation of a lower interest rate is to secure the investment in EPFO and look for better investment opportunities.

BusinessLine has learnt that representatives of trade unions such as the HMS, CITU and the AITUC opposed the proposal tooth and nail in the meeting. “But the Labour Ministry insisted that a higher interest rate will not be effective at the moment given the financial constraints faced by the Centre and considering the global scenario,” said a member of the CBT. “This Government reduced the interest rate steadily in the last seven years. It is yet another attack on the workers,” said a trade union representative in the CBT. The Finance Ministry will take a decision on the interest rate based on the EPFO recommendation.

‘Return gift’

The Opposition parties attacked the Centre over the move.

“Post these assembly election results Modi Government mounts further attacks on the working people with a vengeance. Resist this attack that comes in the background of mounting hardships with job loses, price rise, etc., with all our might,” said CPI(M) general secretary Sitaram Yechury. The Congress said the decision is the “return gift” of the BJP for the victory in four States. “It is the lowest interest rate in the last ten years,” said AICC general secretary Randeep Singh Surjewala.

The pro Government trade union BMS said the move is not acceptable to it. “However, all central trade unions had approved this lower rate of interest due to economic crisis of country and due to the pandemic. The tripartite committee constituted by the Centre had recommended for eight per cent interest. But due to resistance of trade unions, the Government government has increased 0.1 per cent. The Centre claims that this scheme is a loss making scheme and the Centre will not bear any more financial burden,” said BMS general secretary Binoy Kumar Sinha.

COMMENT NOW