The Employees’ Provident Fund Organisation (EPFO) may reduce the interest rate offered to its subscribers by 15-25 basis points for this financial year, Mint reported on Monday.
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This means that millions of salaried people will earn lower returns on their mandatory investment for the financial year ending March 31, 2020. EPFO was offering its subscribers an interest of 8.65 percent in the financial year 2018-19.
The report citing two government official said that the decision comes against the backdrop of the economic downturn, lower yields for debt market instruments and lower interest rates on similar products such as public provident fund and government provident fund.
The announcement on annual interest rate may come by the end of January, the report said.
A 100-basis point fall in interest rates in the market has the potential to impact the EPF payout
by between 55 and 70 basis points. Therefore, EPFO would find it difficult to offer 8.65 percent interest this financial year, especially as it invests 85 percent of its annual accruals in the debt market and 15 percent in equities through exchange-traded funds, the report stated.
“Thus, a 15-25 basis point cut in EPF interest rate this fiscal should not come as a surprise," one of the officials was quoted as saying.
Last year, after an 8.65 percent payout, EPFO was left with a surplus of Rs 151 crore in 2018-19, much less than the surplus of Rs 586 crore in 2017-18.
First Published: Jan 6, 2020 12:45 PM IST
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