Retirement fund body EPFO or Employees’ Provident Fund Organisation has decided to keep the interest rate unchanged at 8.5 per cent for the current financial year 2019-20, the government said on Wednesday. However, the interest payable to provident fund subscribers will be paid in two parts, due to “exceptional circumstances arising out of Covid-19”, the Ministry of Labour & Employment said in a press release. For now, the EPFO will pay interest equivalent to 8.15 per cent, and the remaining 0.35 per cent by December 31, it said.
While the 8.15 per cent interest will be cleared from the organisation’s debt income, the remainder will be paid using the money received through the sale of exchange traded funds (ETFs), subject to their redemption by December 31, the ministry added.
“Because of the bad market conditions, the earnings of EPFO has been affected. That is why CBT (Central Board of Trustees) has decided that EPFO will pay 8.5 per cent interest in two instalments this year,” Virjesh Upadhyay, member of the EPFO’s Central Board of Trustees, and general secretary of RSS-affiliated Bhartiya Mazdoor Sangh, told NDTV.
The EPFO had earlier planned to liquidate some of its investment in ETFs – which are investment pools similar to mutual funds – to provide interest at the rate of 8.5 per cent for the last fiscal year. However, it could not do so because of choppy market conditions triggered by the coronavirus-related situation.
Now, after reassessing the situation, the Central Board of Trustees – which is the top decision-making body of the EPFO – found that a return 8.5 per cent can be provided for 2019-20.
“We have decided to keep our commitment to give 8.5 per cent,” Mr Upadhyay said.
In March, the retirement fund body had lowered the interest rate applicable Employees’ Provident Fund scheme to 8.5 per cent for 2019-20, from 8.65 per cent the previous year.
The EPFO-managed Employees’ Provident Fund is a pension scheme that enables salaried persons to build a corpus for their retirement, with an equal contribution from their employers.