 "Tipping Point: Will interest rate by EPFO rise or fall for this year?")
Interest rates had declined from 8.8 per cent in 2015-16 to 8.65 per cent for 2016-17. Now it looks like the rate announced for 2017-18 will be even lower.
Why is the rate likely to come down again this year?
This may be attributed to two factors. One, returns from the bonds that Employees' Provident Fund Organisation (EPFO) has invested in have come down. Two, EPFO has begun investing 15 per cent of its incremental corpus in equities. Investors’ accounts will henceforth have two parts: a fixed-income portion and an equity portion. The rate that EPFO announces in future will apply to the fixed-income portion only. For the equity portion, it will credit a proportionate number of ETF (exchange traded fund) units in the subscriber's account.
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