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Retirement fund body EPFO is likely to retain 8.65 per cent interest rate on provident fund deposits for its about 50 million members for 2017-18 at its trustees' meet tomorrow, sources said.
In order to maintain the 8.65 per cent interest this fiscal, the Employees Provident Fund Organisation (EPFO) had sold a portion of its investments in the exchange traded funds (ETF) worth Rs 28.86 billion earlier this month, the sources said.
The EPFO had announced this rate on deposits for 2016-17, a tad lower than 8.8 per cent in 2015- 16. It has earned a return of Rs 10.54 billion on sale of ETFs this month, which would be sufficient to provide 8.65 per cent rate of interest this fiscal, said the sources.
The EPFO has been investing in ETFs since August 2015 and it has so far not monetised the ETF investments. The EPFO has invested around Rs 440 billion in the ETFs till date.
According the latest evaluation of the EPFO's investments in ETFs, it has earned a return of 16 per cent. However, this return is notional because it could not be realised unless the EPFO liquidates these ETF investments.
Besides, the trustees may also review the proposal to credit the ETFs into the members' EPF account because a large number of members do not have that level of financial literacy.
It is proposed that the members should be given option to have ETF credits in their EPF account
The sources said that the income projections for the current fiscal were circulated along the agenda to the trustees and would be tabled during the meeting tomorrow.
However, they said that the decision to sell the ETFs was taken after factoring in the income projections for the current fiscal by the EPFO.
The sources said the proposal to reduce administrative charges to 0.5 per cent from existing 0.65 per cent of the total wages of employees, is also listed on the agenda of the meeting tomorrow.
They further said that the draft bill to amend Employees Provident Fund & Miscellaneous Provisions Act would also be placed for vetting by the trustees.