Provident Fund Rate Cut To 8.65 %, 4 Cr Employees To Be Impacted

The interest rate offered on provident fund last year was 8.8 percent.

(Photo: Reuters)

Around four crore provident fund subscribers will receive an interest rate of 8.65 percent on their savings for the year 2016-2017.

The decision was taken on Monday by the retirement fund body Employees Provident Fund Organisation (EPFO), and the Central Board of Trustees (CBT), headed by the Labour Minister Bandaru Dattatreya.

For the fiscal year 2015-16, salaried employees had received 8.8 percent interest rate on their deposits.

Under the retirement saving scheme, an employee of an organisation contributes 12 percent of his/her salary to the EPF account and the employer's contribution is added to the Employee Pension Scheme.

‘Labour Ministry Wanted to Retain 8.8%’

As per the EPFO income projections, retaining 8.8 percent rate of interest for the current fiscal would have left a deficit of Rs 383 crore.

However, the body could have utilised about Rs 409 crore surplus with it, which accrued after providing 8.8 per cent rate of interest for 2015-16, to retain the same rate of return for the current fiscal.

A surplus of about Rs 69.34 crore was stipulated if interest rate was to be lowered to 8.7 per cent.

In September, the government reduced interest rates on small savings schemes marginally by 0.1 percent for the October-December quarter of 2016-17, which resulted in lower returns on PPF, Kisan Vikas Patra, Sukanya Samriddhi Account, among others.

The Labour Ministry, however, wanted to retain 8.8 percent for the current fiscal as well, a source said.

(With inputs from PTI.)