Finance Ministry Approves 8.8% Interest Rate On EPF Deposits for 2015-2016

By BankBazaar | April 25, 2016

Finance Ministry Approves 8.7% Interest Rate On EPF deposits for 2015-2016

The finance ministry seems to have aroused the ire of EPF holders once again. After rolling back the controversial EPF tax that angered the masses because of withdrawal restrictions, the finance ministry has now decided on a lower interest rate for EPF. Contrary to the proposed interest rate of 8.8% by EPFO’s CBT (Central Board of Trustees), the finance ministry has approved an 8.7% rate of interest for EPF.

In a written reply to the Lok Sabha, the Labour Minister Bandaru Dattatreya said, “The (EPFO’s apex decision-making body) CBT, at its meeting held in February 2016, has proposed an interim rate of interest at 8.8 per cent to be credited to the accounts of Employees’ Provident Fund subscribers for 2015-16. The Ministry of Finance has, however, ratified an interest rate of 8.7 per cent.”

This is the first time the finance ministry hasn’t agreed to the interest rate proposed by the CBT. This is the lowest the interest rate has been in the last 3 years. In 2013-14 and 2014-15, the EPFO had provided an interest rate of 8.75%. The rate of interest was 8.5% in 2012-13 and 8.25% in 2011-2012.

As per the EPFO’s estimates (worked out in September), it was projected that the body could easily pay an interest rate of 8.95%. Despite a demand for a 9% rate of interest from the employees’ representatives, the CBT provided an interim rate of 8.8% for 2015-16 at the meeting held in February 2016. Mr. Dattatreya had also assured the EPFO that the interim interest rate would not be revised downward for 2015-16.

Until now, the finance ministry used to approve the EPFO’s proposed interest rate as a matter of protocol. The revision of the interest rate from the one suggested by the labour ministry and the EPFO, is likely to invite the common man’s wrath, yet again.

Additional Reading: Now Withdraw From EPF Without Restrictions

After the EPF tax rollback, we can only watch and wait; will the finance ministry increase the interest rate, if put under pressure again, or will it stick to its guns this time?

UPDATE: EPFO has approved an interest rate of 8.8% after protests from trade unions.

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