EPFO fixes 8.15% interest rate on provident fund

The Employees Provident Fund Organisation (EPFO), the retirement fund manager to India’s nearly 70-million-strong salaried class, has fixed an 8.15% interest rate on employees’ provident fund for 2022-23, a member of its Central Board of Trustees told sources.

Provident fund savings are mandatory under the Employees Provident Funds and Miscellaneous Provisions Act.

In March 2022, EPFO fixed the widely watched savings rate at 8.10%, the lowest in three decades, disappointing millions of employees.

In a country where pensions are not universal, the provident fund is a critical source of social security and assured retirement income.

Provident fund savings are mandatory under the Employees Provident Funds and Miscellaneous Provisions Act, 1952.

According to EPFO rules, at least 12% of an employee’s basic salary is compulsorily deducted to be saved in the provident fund, while an employer co-contributes another 12%.

The Covid pandemic pressured the EPFO’s earnings. The EPFO delayed payments for 2019-20.

This was paid in two instalments deriving from two sources of the EPFO’s investments: 8.15% from debt investments and 0.35% from the equity portfolio.

Apart from deciding the interest rate, the EPFO’s Central Board of Trustees, which is meeting for a two-day conclave on March 27-28, is discussing the annual accounts of the EPFO for 2022-23, its financial performance, and returns from investments.

The Board of Trustees, the key decision-making body, is a tripartite panel represented by the Union government, employers, and employees’ unions.

The EPFO’s savings interest rate takes effect only after it is ratified by the finance ministry, as required by the law.