On Saturday, the Employees' Provident Fund interest rate was reduced from 8.5 to 8.1 per cent for 2021-22. Sources in the labour ministry claim this is the lowest rate since 1977-78. Employees Provident Fund Organizations have around 5 crore members (EPFO).
The decision was made in Guwahati by the EPFO's central board of trustees. An email with the board's recommendations is on its way. In 2020-21, the rate was 8.5%.
The decision was taken after much resistance from the trade unions at the EPFO’s board meeting in Guwahati on Saturday. The central board of trustees of EPFO or CBT is a tripartite body involving government, workers and employers’ representatives and the decision of CBT is binding on EPFO. It is headed by the labour minister.
However, before the interest rate declared by CBT is notified, it must be vetted by the finance ministry. After being notified, the interest income is credited to the subscribers' accounts.
The finance ministry has been pressuring the labour ministry to reduce the interest rate on provident deposits and bring them in line with other small savings schemes.
The rate of interest is only provided by EPFO after it has been approved by the government through the finance ministry. EPFO lowered the interest rate on provident fund deposits to a seven-year low of 8.5 per cent in March 2020, down from 8.65 per cent in 2018-19. The interest rate on the EPF for 2019-20 was the lowest since 2012-13 when it was reduced to 8.5 per cent.
EPFO offered its subscribers an interest rate of 8.65 per cent in 2016-17 and 8.55 per cent in 2017-18. In 2015-16, the interest rate was slightly higher, at 8.8%. It paid an interest rate of 8.75 per cent in 2013-14 and 2014-15, up from 8.5 per cent in 2012-13. In 2011-12, the interest rate was 8.25 per cent.