Guwahati

The Employees' Provident Fund Organisation's (EPFO's) top decision-making body the Central Board of Trustees chaired by Union Minister for Labour and Employment Bhupendra Yadav on Saturday approved 8.1 per cent interest rate on provident fund (PF) deposits for the financial year 2021-22. This is the lowest interest rate on PF deposits in more than four decades.

In the last two financial years, 2020-21 and 2019-20 the interest rates on PF deposits stood at 8.5 per cent. The interest rate for 2021-22 will be the lowest since 1977-78 when it stood at 8 per cent.

"The Central Board recommended 8.10 per cent annual rate of interest to be credited on EPF accumulations in members' accounts for the financial year 2021-22. The interest rate would be officially notified in the government gazette following which EPFO would credit the rate of interest into its subscribers' accounts," the Ministry of Labour & Employment said in a statement.

The Central Board of Trustees is the apex decision making body of the EPFO. It is a tripartite body involving the government, workers and employers' representatives.

The decision on the interest rate on PF deposits for 2021-22 was taken in the 230th meeting of Central Board of Trustees, EPF held during the AKAM Iconic Week in Guwahati.

The union finance ministry will now vet the interest rate recommended by the EPFO's Central Board of Trustees and issue notification.

The interest rates on PF deposits have been reduced sharply in the last six year. In 2015-16 the interest rate on PF deposits stood at 8.8 per cent. It was lowered to 8.65 per cent in 2016-17 and further to 8.55 per cent in 2017-18. In 2018-19 it was increased to 8.65 per cent. However, in 2019-20 it was again lowered to 8.5 per cent. It was kept unchanged in 2020-21.

EPFO despite following a conservative approach towards investment, has consistently generated high returns over the last many years which has enabled it to distribute higher interest to its subscribers, through various economic cycles with minimal credit risk, the Ministry of Labour & Employment said.

Traditionally, EPFO has been able to give a higher rate of interest on retirement savings in comparison to other available investment options because of its prudent investment policy of investing in long tenor high yielding securities for the past several decades. This has ensured that the returns on EPFO's investments are higher even when the yields have been steadily coming down in the past decade, the ministry said.

For FY 2022, EPFO decided to liquidate some of its investment in equities and the interest rate recommended is a result of combined income from interest received from debt investment as well as income realized from equity investment. This enabled EPFO to provide a higher return to its subscribers and still allowed EPFO with a surplus to act as a cushion for providing a higher return in the future also. There is no over-drawl on the EPFO corpus due to this income distribution.

The opposition parties have criticised the government for lowering the interest rates on PF deposits.

Criticising the move Congress Party General Secretary and chief spokesperson Randeep Surjewala said it is an attack on the earnings of crores of workers.

 "The income of 84 per cent people of the country has decreased. Is it right to attack the savings of crores of workers on the basis of electoral victory," Surjewala said in a tweet.

 In a letter addressed to the Union Finance Minister Nirmala Sitharaman,

 Member of Parliament, Rajya Sabha and Communist Party of India (CPI) leader Binoy Viswam wrote a letter to Union Finance Minister Nirmala Sitharaman urging her to reconsider the decision of lowering the PF deposit interest rates.

 "I strongly urge upon you to re-consider this decision and maintain the current interest rate of 8.5 per cent, which in itself requires increase," Viswam wrote in the letter addressed to the union finance minister.