The government has approved interest rate of 8.15 per cent, recommended by the Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO), for its over 6 crore subscribers for the financial year 2022-23. In a circular issued Monday, the EPFO said the Ministry of Labour and Employment has conveyed the approval of the central government for the EPF interest rate to be credited into members’ accounts.
As per convention, the Ministry of Labour and Employment had sent the interest rate recommendation to the Ministry of Finance for ratification. After the government’s consent to the interest rate, the EPFO would now start crediting the rate of interest for the previous fiscal to the EPF subscribers.
“The Ministry of Labour and Employment, Government of India, has conveyed the approval of the Central Government under para 60(1) of Employees’ Provident Fund Scheme, 1952 to credit interest @ 8.15% for the year 2022-23 to the account of each member of the EPF Scheme as per the provisions under Para 60 of EPF Scheme, 1952,” the EPFO circular said.
In March this year, the Central Board of Trustees (CBT) of the EPFO had recommended an interest rate of 8.15 per cent for its over 6 crore subscribers for the current financial year 2022-23, marginally higher than 8.1 per cent for the previous year. After the 8.15 per cent payout, the retirement fund body will be left with a surplus of Rs 663.91 crore, a statement released by the Ministry of Labour and Employment had then said.
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EPFO’s deficit
The interest rate had been hiked despite the EPFO registering a deficit of around Rs 197 crore in 2021-22 against an estimated surplus of Rs 350-400 crore for 2021-22 when an 8.1 per cent interest rate was recommended for the year in March 2022. The 8.1 per cent rate for 2021-22, ratified by the Finance Ministry in June 2022, was the lowest in four decades.
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The decline in the Fund’s amount to a deficit in the previous financial year 2021-22 happened primarily as several exempted establishments approached the EPFO for surrendering their exempt status. Total 83 cases were received for surrendering of exempt status, out of which five cases were placed before the CBT for its consideration.
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Over the years, the finance ministry has questioned the high rate retained by EPFO and has been nudging it to reduce it to a sub-8 per cent level. EPFO rate continues to be among the highest when compared with other savings instruments, with small savings rates ranging from 4.0 per cent to 8.2 per cent.