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NEW DELHI: The Employees’ Provident Fund Organisation (EPFO), the state-run retirement fund manager and a popular savings scheme for millions of salaried middle-class Indians, on Saturday decided on an 8.1% interest on provident fund deposits for 2021-22, a downward revision.
In the previous year (2020-21), the fund manager kept the interest rate on savings steady at 8.5% but Saturday’s downward revision is lowest in years.
The decision to lower the interest rate, a widely watched working-class metric of savings, will not cheer the nearly 60 million active EPFO subscribers, for whom provident fund is often the only mode to save funds for retirement.
Provident fund savings are mandatory under the Employees Provident Funds and Miscellaneous Provisions Act, 1952.
“In today’s meet, EPFO consensus has been that it will pay an 8.1% interest on deposits based on the current position of earnings and deposits of the organisation,” Virjesh Upadhyay, a board member of EPFO, told HT.
According to EPFO rules, at least 12% of an employee’s basic salary is compulsorily deducted to be saved in provident fund, while an employer co-contributes another 12%.
The Covid pandemic pressured EPFO’s earnings. EPFO delayed payments for 2019-20. This was paid in 2 instalments, deriving from 2 sources of EPFO’s investments: 8.15% from debt investments and 0.35% from equity portfolio.
Pressured earnings have forced the retirement fund manager to revise down the interest rates payable to depositors in some preceding years. For instance, during 2017-18, the organisation paid an 8.55% interest rate. In 2016-17, the interest rate was even higher at 8.65%.
According to the labour ministry’s latest provisional estimates of payroll data released on January 22, 2022, EPFO added 13.95 lakh net subscribers during November 2021, an increase of 2.85 lakh net additions over the previous month of October, 2021 with a growth rate of 25.65%.
The January 2022 update, which gave age-wise comparison of payroll data, shows the age-group of 22-25 years registered highest number of net enrolments with 3.64 lakh additions during November, 2021.
Age-group of 18-21 also registered an addition of nearly 2.81 lakh net enrolments. Age-group of 18-25 years have contributed around 46.20% of the total net subscriber additions in November, 2021.
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