25 Apr, 2016 04:21 PM

Govt approves 8.7 per cent interest on EPF for 2015-16

The Ministry of Finance has approved an 8.7 per cent interest on employee provident fund (EPF) for 2015-16, Labour Minister Bandaru Dattatreya informed the Lok Sabha on Monday. Earlier, the Central Board of Trustees (CBT) of EPFO had recommended a slightly higher 8.8 per cent interest rate for 2015-16. The government last year had kept the interest rate at 8.75 per cent.

“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,” Dattatreya said.

This would be a marginal reduction in interest rate for the 40 million subscribers of Employees Provident Fund organisation (EPFO).

EPFO had provided 8.75 per cent rate of interest in 2013-14 and 2014-15, which was higher than 8.5 per cent in 2012-13 and 8.25 per cent in 2011-12. EPFO’s estimates, which were worked out in September, projected that the body can easily pay 8.95 per cent rate of interest as it would leave a surplus of Rs 100 crore.

However, this rate is a favourable in comparison to other small saving instruments for which the interest rate were drastically reduced by the government in the range of 40-130 basis points. After that move the PPF interest rate has been set at 8.1 per cent against 8.7 per cent earlier, while Sukanya Samridhi Yojna interest rate has been set 8.6 per cent against 9.2 per cent earlier. Senior citizen saving scheme is now offering 8.6 per cent against 9.3 per cent earlier.
On Kisan Vikas Patra (KVP), the interest rate from April 1 has been reduced to 7.8 per cent from 8.7 per cent.

The popular Five-Year National Savings Certificates is earning an interest rate of 8.1 per cent from April 1 as against 8.5 per cent.

Reduction in interest rate for small savings were done in line with the overall softening interest rate in the system.