EPFO likely to reduce interest rate for FY25 in Friday board meeting

Last year, interest rate for FY24 was fixed at 8.25 per cent by CBT, the apex decision making body of the social security organisation

The Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) is likely to effect a reduction in the interest rate paid on retirement savings accumulated by its nearly 300 million members for this financial year, in the wake of ebbing stock markets and bond yields, combined with higher settlements of claims. 

  The trustees, slated to meet this Friday to take a call on the EPF rate for 2024-25, had raised the annual payout rate to 8.25 per cent last year from 8.15 per cent in 2022-23. The Investment committee of the board had met last week to discuss EPFO’s income and expenditure profile in order to recommend the EPF rate for the board to consider.

  “The rate of interest for this year will possibly be lower than what it was in the preceding year, precisely for the reason that bond yields have dipped in recent months and the retirement fund body may not be left with much of a surplus if a higher interest rate is announced to deal with any exigency,” said an employer representative in the board, requesting anonymity.

  Another board member, representing employees, expressed an apprehension that the rate could be lower this year as the investment panel has evinced a keenness to maintain a surplus for dealing with exigencies. Moreover, higher settlements of claims, while being a good augury for workers, has left a lesser pool to tap for the annual EPF credits. As of January, the EPFO had processed over 50.8 million claims worth Rs 2.05 trillion in 2024-25,  compared to 44.5 million claims worth Rs 1.82 trillion settled in all of 2023-24.

  Sheo Prasad Tiwari, national general secretary, TUCC, who represents employees on the board, however, noted that the current financial year had seen ‘decent’ returns on investments and the subscriber base had also increased, so the EPF rate need not be cut.  

  “These are the savings of millions of people belonging to the lower income groups. Cutting the interest rate is only going to exacerbate their sufferings in these times of high inflation. Our assessment is that it will remain unchanged as last year, if not move up,” he averred.

  Apart from the EPF rate, the board of trustees, chaired by Union Labour and Employment Minister Mansukh Mandaviya, is also slated to discuss a hike in the benefits paid out to members’ dependent family members under the Employees’ Deposit Linked Insurance scheme, of the current actuarial valuation.

  The board is also set to discuss the issue of paying higher pensions to members, and review a status note on the recently launched Centralized Pension Payments System that allows for disbursing pension through any branch of any bank across India. 

The board’s executive committee, chaired by Labour Secretary Sumita Dawra, that met on Tuesday, was informed that 70 per cent of the applications received for pension on higher wages, in line with a SC judgment of November 2022, had been processed.  

Weighty Agenda 

- The EPFO board, chaired by Labour Minister Mansukh Mandaviya, is meeting tomorrow 

- The EPF rate for 2024-25 is likely to be lowered from 8.25% in view of declining bond yields and a stock market downturn

  - Benefits under the Employees’ Deposit Linked Insurance scheme may be hiked from present range of Rs 2.5 lakh to Rs 7 lakh

  - Board to review status of higher pension applications; EPFO says it has cleared 70% cases and will approve all by March 31