EPFO board recommends an unchanged 8.5% interest on deposits for 2020-21

The Employees’ Provident Fund Organisation (EPFO) has kept the interest rates unchanged on provident fund deposits at 8.5 per cent for financial year 2020-21.

The announcement comes on the back of large withdrawals and fewer contributions through out the last year amid the coronavirus pandemic.

There were speculations that the EPFO would lower interest on provident fund deposits for this fiscal (2020-21) from 8.5 per cent given in 2019-20, owing to the coronavirus-induced slowdown through 2020.

The retirement fund body has more than 50 million active subscribers

The decision was taken at the Central Board of Trustees (CBT) meeting, which is the main decision-making body of EPFO. The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into the subscribers’ accounts

"For FY21, EPFO decided to liquidate investment in and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realized from equity investment," the ministry of labour and employment said.

In March, last year, the EPFO had reduced the interest rate to a 8.5 per cent for 2019-20, which is a seven-year low. The interest rate was 8.65 per cent in 2018-19 and 8.55 per cent for 2017-18. It was 8.65 per cent in 2016-17.

Net new enrolments with the retirement fund body grew by 24 per cent to 1.25 million in December, indicating a return to the pre-Covid levels of subscriber growth for the EPFO, according to the payroll data released last Saturday.

"The assured fixed return approach of EPFO, announced by CBT every year along with the tax exemptions makes it an attractive choice for investors, providing them with strong social security in the form of provident fund, pension and insurance schemes," it said