EPF interest rate 2021-22: The Employees’ Provident Fund Organisation (EPFO) on Saturday decided to pay 8.1 per cent rate of interest on provident fund deposits for the current financial year 2021-22, sources told CNBC-TV18. The decision was taken in EPFO‘s central board of trustees meeting today.
The decision was taken after much resistance from the trade unions at the EPFO’s board meeting in Guwahati on Saturday. The central board of trustees of EPFO or CBT is a tripartite body involving government, workers and employers’ representatives and the decision of CBT is binding on EPFO. It is headed by the labour minister.
Bhupender Yadav, Labour Minister, explaining the rationale behind the decision, said: “Happy to say if one does a 10 yr FD with SBI then one earns 5.45 per cent, on our similar instruments be it PPF or other instruments in all of those 6.8% to 7.1 per cent interest is distributed. Hence this year, our Board keeping in mind the global situation and equity markets, maintaining a balance of investment with social security, we can’t opt for very high-risk instruments, we are not market makers but in the market for stability and social security and that’s why for this year our board has recommended that EPF rate be 8.1 per cent according to our estimated earnings, and I am happy to say despite this recommendation our surplus will be 450 cr and we think we will be very close to our estimates. The rationale behind this recommendation is we want to strike a balance between the safety of EPF corpus with high returns and we will look for well thought out options of investment.”
Earlier, the retirement body kept the interest rate unchanged on the provident fund deposits at 8.5 per cent for the financial year 2020-21, despite the substantial withdrawals in the wake of Covid’s impact on people’s financial resources. The retirement fund body saw high withdrawals and lower contributions in the aftermath of the Covid-19 pandemic. Until December 31, the EPFO had settled 56.79 lakh claims worth Rs 14,310.21 crore provided under the advance facility.
Prior to that, the EPFO had reduced the interest rate on provident fund deposits to a seven-year low of 8.5 per cent for 2019-20. The interest rate was 8.65 per cent in 2018-19. The EPFO had provided 8.55 per cent interest rate to its subscribers for 2017-18. The interest rate was 8.65 per cent in 2016-17.
The Central Board of Trustee, which is a key decision-making body for EPFO, takes a call on the interest rates, that has to be provided on the provident fund deposits, every year. Once CBT decides an interest rate on EPF deposits for a fiscal year, it is sent to the Ministry of Finance for concurrence. EPFO provides the rate of interest only after it is ratified by the government through the finance ministry.
EPF interest rate 2021-22: What is EPF?
EPF is a mandatory savings scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is managed under the aegis of Employees’ Provident Fund Organisation (EPFO). It covers every establishment in which 20 or more persons are employed. The employee has to pay a certain contribution towards the provident fund and the same amount is paid by the employer on a monthly basis. At the end of retirement or during the service (under some circumstances), the employee gets the lump sum amount including the interest on PF contributed which gets accrued. Nearly 4.9 crore new subscribers joined Employees’ Provident Fund (EPF) scheme during September 2017 to November 2021 period, government data showed.
According to the labour ministry’s latest provisional estimates of payroll data released on January 22, 2022, EPFO added 13.95 lakh net subscribers during November 2021, an increase of 2.85 lakh net additions over the previous month of October, 2021 with a growth rate of 25.65 per cent.
The January 2022 update, which gave age-wise comparison of payroll data, shows the age-group of 22-25 years registered highest number of net enrolments with 3.64 lakh additions during November, 2021.
Age-group of 18-21 also registered an addition of nearly 2.81 lakh net enrolments. Age-group of 18-25 years have contributed around 46.20 per cent of the total net subscriber additions in November, 2021.
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