The Central Board of Trustees (CBT), the apex decision-making body of the Employees’ Provident Fund Organisation (EPFO), has proposed a new interest rate of 8.15% for Provident Fund deposits for the current fiscal year 2022-23 (FY23), to nearly 6 crore subscribers.
- This proposed interest rate (8.15%) is 0.05 % higher than the 8.10% interest rate of FY22, which is the lowest in four decades.
This is the first increase in the Employees’ Provident Fund (EPF) interest rate since 2018-19, when it was lifted to 8.65% from 8.5% previously.
- In contrast, it is the smallest rate hike in terms of quantum since 2015–16, when the rate was raised by a similar 0.05 % basis points to 8.8% from 8.75%.
Note: As a result of the COVID-19 pandemic, EPFO reduced the interest rate on provident fund deposits in March 2020 to a seven-year low of 8.5% for FY20 from 8.65% for FY19.
Backdrop
i.The decision was made at the 233rd meeting of the CBT, EPFO, which was presided over by Union Minister Bhupender Yadav, Ministry of Labour & Employment (MoLE).
ii.The decision is taken due to rising interest rates in the financial system as a result of periodic rate hikes by the Central Bank of India (RBI) and a larger surplus with EPFO.
Significance
i.The proposed rate of interest of 8.15% protects the surplus and guarantees increased income to members.
- With an interest rate of 8.15%, the EPFO would have a small surplus of Rs. 663.91 crore in FY23, which is higher than the estimated value for FY22.
- It should be noted that the MoLE projected a surplus of Rs. 350–400 crore while recommending 8.10% for FY22, which ended in a deficit of Rs. 197.72 crore.
ii.The EPFO is expected to have a principal amount of Rs. 11.02 lakh crore, and an income of Rs. 90,497.57 crore for FY23, which is the highest recommended income so far.
- This is substantially greater than the income of Rs. 77,424.84 crore and the principal of Rs. 9.56 lakh crore in FY22.
iii.When compared to FY22, the growth in income and principal is more than 16% and 15%, respectively.
The Process Ahead
i.The EPFO will now forward the recommended rate of interest of 8.15% for FY23 to the Ministry of Finance (MoF) for final approval, which is expected in June 2023.
ii.It will then be published in the government gazette, after which depositors will receive about Rs 90,000 crore in interest during FY23, benefiting 67.8 million subscribers.
iii.The revised rate of 8.15% will benefit around 27 crore account holders, including over 7.1 million pensioners.
Comparison with other savings instruments
i.Given the credit profile of EPFO investment, the interest rate is greater than other similar investment options available to subscribers.
ii.With small savings rates ranging from 4.0% to 7.6%, the EPFO rate continues to be the highest among all savings instruments.
iii.The return is higher when compared to similar products such as the public provident fund (PPF), which offers an interest rate of 7.1% for the current quarter.
iv.The interest rate on Sukanya Samriddhi Yojana, a small savings scheme, is 7.6%.
v.The senior citizens’ savings plan offers the most attractive rate under the small savings scheme at 8%.
Central Board of Trustees (CBT)
i.The CBT, which is led by Union Minister Bhupender Yadav and includes representatives from businesses and employees, recommends the interest rate, which is then approved by the MoF.
ii.It is then reported to the MoLE and credited into the subscribers’ accounts by the EPFO.
Employees’ Provident Fund Organisation (EPFO)
i.EPFO is a social security organisation that provides social security benefits through provident, pension, and insurance funds.
ii.It offers social security benefits to India’s organised workforce under the provisions of the Employees’ Provident Funds and Other Provisions Act, 1952.
iii.In January 2023, EPFO added 14.86 lakh net members.
Other significant decisions taken at the 233rd CBT meeting
i.The CBT approved the Revised Estimates for 2022-23, as well as the Budget Estimates for 2023-24, for EPFO-administered schemes.
ii.The CBT approved the 5-year perspective plan for improving EPFO’s physical infrastructure, which involves a budget of Rs. 2200 crores on land purchases, building construction, and special repairs.
iii.The CBT was informed of the steps taken to comply with the Supreme Court ruling on pensions on higher wages and the steps taken regarding the filing of options etc.,
iv.The proposal to elevate EPFO’s membership status in the International Social Security Association (ISSA) from Associate Member to Affiliate Member was approved by the CBT.
- This was consistent with the ‘EPFO@2047’ vision document and would allow EPFO to play a larger role in ISSA’s international social security platform.
v.CBT approved the umbrella Memorandum of Understanding (MOU) signed by EPFO and the National Testing Agency (NTA) for the conduct of various examinations.
vi.The CBT approved the formation of the Committee for suggesting amendments to the Employees’ Provident Fund (Officers and Employees Conditions of Service) Regulations, 2008.
vii.The proposal to extend the Asset Management Company (AMC) for portfolio managers was approved by the CBT.
viii.The CBT approved the proposal to invest the proceeds of Exchange-Traded Fund (ETF) investments in any of the permissible investment categories, subject to the category limit.
Bhupender Yadav launches e-passbook for EPFO members, inaugurates crèche facility in 63 regional offices of EPFO
Union Minister Bhupender Yadav, MoLW, has launched an e-passbook for the benefit and convenience of EPFO members.
- With the addition of this feature, members will now be able to examine more information about their accounts in graphical form.
Other Endeavours
i.He dedicated a crèche facility in 63 regional offices of EPFO with 100 or more employees.
ii.He laid the groundwork for the Regional Office building in Prayagraj, Uttar Pradesh.
iii.He also virtually inaugurated the Regional Office building in Keonjhar, Odisha.
Nidhi Aapke Nikat 2.0
i.A presentation about ‘Nidhi Aapke Nikat 2.0’, an initiative of EPFO, was made before the CBT.
ii.Nidhi Aapke Nikat 2.0 is a district outreach programme that takes place on the 27th of every month in India.
iii.The CBT members participated in live interaction with district camps in Vadodara (Gujarat) and Baksa (Assam).
Recent Related News:
i.In January 2023, Arti Ahuja, Secretary, MoLE, e-launched the EPFO district outreach program “Nidhi Aapke Nikat 2.0” in all the districts of India.
ii.Nidhi Aapke Nikat 2.0 will be conducted on the 27th of every month at all district headquarters of EPFO, to create participatory awareness among all stakeholders and provide a grievance redressal platform.
About Employees’ Provident Fund Organisation (EPFO):
Central Provident Fund Commissioner(CPFC)/CEO – Neelam Shami Rao ,
Headquarters – New Delhi, Delhi
Establishment – 1952
