Employee Provident Fund May Get 8.6% Interest In 2016-17: Report

New Delhi: Over four crore subscribers of the Employees' Provident Fund Organisation may get a lower interest at a rate of 8.6 per cent on their deposits for the current financial year as the Labour Ministry is expected to toe the Finance Ministry line to cut the rate.

Retirement fund body EPFO had provided a rate of interest of 8.8 per cent on EPF deposits for 2015-16, despite the Finance Ministry's ratification for 8.7 per cent.

"Finance Ministry has been nudging Labour Ministry to keep interest rate on EPF in line with other small savings schemes administered by it. There is a broad consensus between the two ministries to fix 8.6 per cent interest for this fiscal," a source privy to the development said.

The source further said that EPFO has not worked out the income projection for the current fiscal year. The Central Board of Trustees (CBT), which is the apex decision-making body of EPFO, takes a call on interest rate on the basis of income projection.

The Board fixes the rate of interest for a financial year and it is approved by its advisory body, Finance, Audit and Investment Committee (FAIC).

As per the practice, the Finance Ministry gives concurrence to the rate of interest fixed by the Central Board of Trustees considering the income projections of a year. After its ratification, the interest rate is notified and credited into the accounts of subscribers.

An official said, "Finance Ministry's concurrence is required to ensure that EPFO's payout does not exceed its income and the body meets the fund requirement from its own resources."

"Finance Ministry wants to bring interest rate to 8.6 per cent for its small savings schemes like Public Provident Fund (PPF) in view of depleting yield of government securities and other saving instruments in the market."

Trade unions have been of consistent view that Finance Ministry should not encroach on the decision of the Central Board of Trustees as EPF is workers' money and they get interest from the income earned on investments of their funds.

In the last fiscal year, EPFO was in a position to provide a rate of interest of 8.95 per cent on the basis of its income projection and it would have left Rs 100 crore surplus.

However, the CBT chose to fix 8.8 per cent interest on EPF for last fiscal year which was further reduced by the Finance Ministry to 8.7 per cent. Facing stiff opposition from all corners, the government accepted CBT's decision of 8.8 per cent interest on EPF for 2015-16.

EPFO had provided a rate of interest of 8.75 per cent in 2013-14 and 2014-15, which was higher than 8.5 per cent in 2012-13 and 8.25 per cent in 2011-12.