Retirement fund agency EPFO is likely to credit an 8.5 percent interest rate for 2019-20 on the provident fund (EPF) accounts of employees of around six million one-time subscribers to end of december.
Earlier in September this year, the Employee Provident Fund Organization had decided to divide the 8.5 percent interest into two installments of 8.15 percent and 0.35 percent at its trustee meetings headed by Labor Minister Santosh Gangwar.
A senior source told PTI that the Ministry of Labor submitted a proposal to the Ministry of Finance to grant its consent to credit an 8.5 percent interest rate on EPF for 2019-20 earlier this month.
“The ratification of the Ministry of Finance is likely in a few days. Therefore, it is likely that interest will be credited only this month.”
The source also said that previously the Ministry of Finance had requested some clarifications on the interest rate for the last fiscal, which were duly addressed.
In March this year, EPFO’s highest decision-making body, the Central Board of Directors headed by Labor Minister Santosh Gangwar, approved an 8.5 percent interest rate on the EPF for 2019-20.
At a CBT virtual meeting in September, EPFO had decided to honor its commitment to provide an interest rate of 8.5 percent for the last fiscal year. But the CBT had also decided to divide the interest rate into two installments of 8.15 percent and 0.35 percent in view of the pandemic.
Next, the Ministry of Labor had explained that “in the face of exceptional circumstances derived from COVID-19, the CBT reviewed the agenda on the interest rate and recommended the same rate of 8.50 percent to the Central Government.
“This (8.5 percent interest) would comprise 8.15 percent of debt proceeds and the balance of 0.35 percent (capital gain) from the sale of ETFs (exchange-traded funds) subject to to its redemption before December 31, 2020, “he had said.
The CBT had recommended accounting for such capital gains (from the sale of ETFs) in the results of the financial year 2019-20 as an exceptional case.
As previously planned, the EPFO had to provide an 8.15 percent interest on the EPF shortly after requesting approval from the Ministry of Finance. It has planned to credit the remaining 0.35 percent rate before December 31, after the ETF liquidation proposal.
The EPFO had previously planned to liquidate part of its investment in ETFs to provide 8.5 percent interest for the last fiscal year.
However, it was unable to do so due to choppy market conditions amid the COVID-19-induced lockdown.
The source also said that since market conditions are more than favorable as benchmarks are at a record high, there shouldn’t be a problem crediting 8.5 percent all at once.