New Delhi: Subscribers of retirement fund Employees’ Provident Fund (EPF) are likely to get the entire 8.5% declared interest rate for FY2019-20 at one go as Employees’ Provident Fund Organisation (EPFO) has been able to sell its equity holdings and earn higher-than-expected returns in December due to the market rally. EPFO has now double the surplus projected three months back, Business Standard newspaper quoted an unnamed senior EPFO official as saying in a report.
As per the report, the Union labour and employment ministry has written to the finance ministry, seeking 8.5% interest to be credited into around 190 million EPF accounts for 2019-20.
“The recommendation is pending approval of the finance ministry which is expected to come within a week. The labour ministry has proposed to notify the interest rate at one go now,” a top government official told the publication.
Earlier in September, the central board of trustees (CBT) had announced that EPFO would be crediting the interest in two instalments for the first time as the retirement fund was not able to liquidate its equity investments due to the COVID-led market fall. Hence EPFO had decided to credit 8.15% interest (earned from its debt investments) immediately and the remaining 0.35% interest (capital gain from equity investments) later subject to its redemption.
The retirement fund body invests up to 15% of its incremental corpus in ETFs. In FY20, the EPFO’s equity investments accrued a return of minus 8.3%, down from 14.7% in FY19. However, due to the sharp rebound witnessed in equity markets in October, November and December so far, EPFO has been able to liquidate its equity investments at profit.
EPFO had given 8.65% interest in FY19. The 8.5% interest for FY20 is a seven-year low. But the fall in EPF interest for FY20 is much lower than the overall fall in market interest rate on similar products. Worth mentioning here is that fixed deposit interest rates have fallen by nearly 150 basis points over the last one year.
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