The Employees Provident Fund Organisation (EPFO) may cut the rate of interest on provident fund savings from 8.65 per cent in 2016-17 to 8.5 per cent in 2017-18 fiscal year, reports Economic Times. While talking to ET, an official said that falling interest rates in the market forced the retirement funds body to go for a cut in interest rates on PF savings.
In August, Punjab National Bank and HDFC Banks slashed interest rate on savings bank accounts by 50 basis points to 3.5% on the deposits of Rs 50 lakh.
The Central Board of Trustees, the apex decision-making body in EPFO, will meet on 23 November to take up the proposal.
The cut in interest rate will decrease the total returns but an official told ET that returns would be on a par with or more than last year as they stand to gain from the fund’s move to unitise its equity investment.
Till date, EPFO invests 15 per cent of its total corpus into equities through exchange-traded funds. It is also considering to deposit the share of profit from such investments into PF accounts of the subscribers.
At present EPFO has more than 4.5 crore subscribers. As per the practice, the board’s decision is concurred with by the finance ministry after evaluating whether the organisation would be able to provide the rate approved by the trustees through its own income or not, reports ET.
Last year, the board of trustees had cut the interest rate on PF holdings to 8.65 per cent from 8.8 per cent the year before.