NEW DELHI, March 12: The return on the deposits parked with the Employees’ Provident Fund Organisation (EPFO) has been slashed to 8.1% for 2021-22 from the 8.5% rate credited to EPF members’ accounts in the last two years, the lowest in the last 43 years.
The last time the EPF savings were paid an annual return this low was in 1977-78, when the rate was 8%, but that marked the highest EPF rate at the time since the EPFO’s inception in 1952. Since then, the EPF rate has only been lower than 8.5% in three years — 1979-80, 1980-81 and 2011-12 — when an 8.25% return was paid on balances.
The EPFO’s Central Board of Trustees (CBT), chaired by Labour and Employment Minister Bhupender Yadav, recommended 8.1% at its meeting in Guwahati on Saturday. The rate will have to be ratified by the Finance Ministry before it is notified and credited to members’ accounts.
The cut in the EPF rate, at a time when inflation is resurging, attracted criticism from the central trade union representatives on the board who called for the 8.5% return to be retained. Employee representatives had also opposed the last rate cut on EPF savings from 8.65% in 2018-19 to 8.5% in 2019-20.
Yadav sought to downplay concerns and said he feels good to announce 8.1% at a time when a 10-year fixed deposit with the State Bank of India yields just around 5.4%, while returns on savings instruments like the Public Provident Fund are in the range of 6.8% to 7.1%. “This year, our Board, keeping the kind of international situation and the [volatile] condition of the stock markets, has opted to keep social security goals in mind with the investments. We cannot invest in high–risk instruments, we are looking at stable returns for social security needs,” he said after the meeting.
The EPFO’s income from investments this year stood at ₹76,768 crore from about ₹70,000 crore in 2020-21, when it had paid out 8.5% to EPF accounts. The EPF corpus went up during the year from ₹8.29 lakh crore to ₹9.42 lakh crore.
The EPF accounts are mandatory for employees earning up to ₹15,000 a month in firms with over 20 workers, with 12% of the basic pay and dearness allowance deducted as employees’ contribution and another 12% remitted by the employer. Part of this cumulative 24% contribution is remitted to the Employees’ Pension Scheme of 1995.
(Manas Dasgupta)