EPFO lowers interest rate to 8.55% for 2017-18

The Employees Provident Fund Organisation (EPFO), the retirement fund body, on Wednesday announced a lowering of interest rate for its over 60 million subscribers to 8.55 per cent for the current fiscal (2017-18) from 8.65 per cent in the previous fiscal.

The Central Board of Trustees (CBT), the apex decision making body of the EPFO, announced the decision after its meeting on Wednesday.

"It is difficult to evaluate about future in view of present economic scenario. We paid 8.65 per cent last fiscal, which left a surplus of Rs695 crore. This year, we have decided to recommend 8.55 per cent for 2017-18, which will leave a surplus of Rs586 crore," labour minister Santosh Gangwar, who also heads the CBT, said.

Speaking to reporters after the Employees' Provident Fund Organisation's (EPFO) trustees meeting, Gangwar said he expects the finance ministry to give concurrence to the 8.55 per cent rate of interest.

The CBT's decision on interest rate proposal has to be vetted by the finance ministry. Once approved by the finance ministry, the rate of interest is credited into subscribers' account.

Gangwar expressed hope that the trade unions will agree to the decision of providing 8.55 per cent rate of interest.

He said the EPFO had to liquidate a portion of its investments in the exchange traded funds (ETFs) to bridge the shortfall to provide 8.55 per cent interest this fiscal.

He said the EPFO received 8 per cent returns on its bond investments but it is able to pay 8.55 per cent rate because it has sold some of its investments in ETFs.

However, he said, it is higher than 7.6 per cent provided to General Provident Fund and Public Provident Fund subscribers.

Gangwar further said the ETF investments have fetched a return of 20.65 per cent so far, and in the months of January and February this year, the EPFO has sold Rs3,700 crore ETFs which earned a return of Rs1,011 crore.

The EPFO has invested around Rs44,000 crore so far in the ETFs. It had started investing in ETFs in August 2015.

He also said the CBT has decided to reduce the administrative charges from 0.65 per cent to 0.50 per cent of total wages paid by employers.

The minister also said the trust has also decided to reduce the workers threshold for coverage under the EPFO schemes to 10 from existing 20. At present, all those units employing 20 or more employees are mandatorily covered under the social security schemes run by the EPFO.

He expressed hopes that reduction in employees threshold could help increase the EPFO subscribers' base from existing 60 million to even 90 million.

Gangwar also assured that the required amendment in the Employees' Provident Fund & Miscellaneous Provisions Act would be done to implement the decision to reduce employees threshold.

The minister also launched the EPFO's Uan-Aadhar linking facility for the convenience of the members using EPFO link in UMANG mobile application. This is in addition to existing facility on the website of the EPFO.