The Ministry of Labour and the Employees Provident Fund Organisation (EPFO) have said that it has decided to stick to the 8.65 percent return for the current financial year, proposed by the retirement savings body’s board of trustees.
The EPFO earlier this year had decided to provide the interest of 8.65 percent on the provident fund deposit for the financial year FY19, which is 10 basis points higher than the 8.55 percent given in 2017-18.
Meanwhile, the interest rate of EPF was at a five-year low at 8.55 percent in the fiscal year 2017-18. The 8.65 percent proposal would have benefitted approximately 45 million subscribers of the retirement savings account.
However, the Finance Ministry had objected the proposal that aimed to increase the payout to 8.65 percent from 8.55 percent. It had also asked the labour ministry and EPFO to review the hike.
The objection came at a time when banks were refusing to lower lending rates accounting to the high cost of funds, which in turn is linked to their inability to increase the deposit rates.
The banks argued that small savings schemes like public provident fund (PPF) and EPFO offer higher interest rates, and a reduction in deposit rates will reportedly impact their fund-raising ability. The EPFO has decided to stick to the revised rate, as per an English daily report. Despite the higher payout this financial year, the EPFO will still be left with a surplus of over Rs 150 crore, the report quoted sources as saying.