In what could bring cheer to 60 million salaried employees, the Employees’ Provident Fund Organisation (EPFO) may raise interest rates from 8.55 per cent currently. Three officials with knowledge of the matter told Live Mint that if not raised, it will at least be retained at the existing level, making it one of the most rewarding savings scheme.
Although the EPFO rate is declared in December every year, there was a slight delay in 2018 as the account audit was still being done. It is now expected to be announced on February 1.
There is little scope for reducing the rate and efforts would be made to increase the return, Prabhakar Banasure, member of EPFO’s central board of trustees, told the business daily.
The interest rate would be in line with what the government recently announced incentives such as a nearly 50 per cent hike in incentives for frontline health workers, including those working at Integrated Child Development Scheme centres (anganwadis). The government has also made the National Pension System (NPS) withdrawals tax-free.
The average interest rate of Public Provident Fund and National Savings Certificate in 2018 was 7.7 per cent while leading ultra short-term debt funds returned an average of 7.78 per cent.
EPFO manages retirement savings of over Rs 11 trillion. When the retirement body offered an 8.55 per cent rate in 2018, it had a surplus of Rs 600 crore. The EPFO's equity investments have a notional return of around 12 per cent and might be used if required, the report added.
The EPFO presently covers 190 industries (mentioned in Schedule 1 of the EPF Act) with over 200 million accounts in over 1.13 million covered establishments.