Interest rate on EPFO deposits raised to 8.15%

The Employees' Provident Fund Organisation (EPFO) on Tuesday decided to increase the rate of interest on provident fund deposits for the financial year ending 31st March 2023 to 8.15 per cent, a paltry 0.05 percentage point higher than the four-decades low of 8.10 per cent offered in fiscal 2021-22.

Last year, EPFO, which is responsible for managing the retirement fund in India, had cut the interest rate for fiscal 2021-22 to 8.10 per cent from 8.5 per cent in the previous year.

The rate of interest offered on provident fund deposits in 2021-22 was the lowest since 1977-78, when it stood at 8 per cent. For the current fiscal also the interest rate remains almost at the level of four decades low despite a sharp jump in interest offered on fixed deposits.

Most financial institutions have sharply increased interest on fixed deposits in the past one year in line with the increase in repo rate by the Reserve Bank of India. The central bank has hiked the policy repo rate by 250 basis points since May 2022.

Central Board of Trustees, the apex decision making body of EPFO, is responsible for taking the decision on interest rates. The board held its meeting in the national capital on 27-28 March under the chairmanship of Union Labour and Employment Minister Bhupender Yadav.

“The Central Board recommended 8.15 per cent annual rate of interest to be credited on EPF accumulations in members’ accounts for the financial year 2022-23,” the Ministry of Labour & Employment said in a statement.

The interest rate would be officially notified in the government gazette after approval of the Ministry of Finance, following which EPFO would credit the rate of interest into its subscribers’ accounts.

EPFO has around 6 crore subscribers. The Board’s recommendation involves distribution of more than Rs 90,000 crore in the members’ account as interests on the total principal amount of about Rs 11 lakh crore.

In the financial year 2021-22, the total principal amount stood at around Rs 9.56 lakh crore. The interest paid during the fiscal 2021-22 stood at Rs 77,424.84 crore.

The total income recommended for being distributed is highest till date. The growth in income and the principal amount is respectively more than 16 per cent and 15 per cent as compared to last financial year 2021-22, the ministry said.

“Considering the credit profile of the EPFO investment, the interest rate of EPFO is higher than other comparable investment avenues available for subscribers. EPFO has consistently followed a prudent and balanced approach towards investment, putting highest emphasis on the safety and preservation of principal with an approach of caution and growth,” the ministry added.