EPFO Cuts Interest Rate Again: A Look At Its Rise, Fall And Comparison From Previous Years

New Delhi: Nearly 5 crore subscribers have been affected after EPFO or Employees' Provident Fund Organisation, the retirement fund body,  reduced the interest rate for the year 2017-18. The interest rate this year would be 8.55 per cent from an earlier interest rate of 8.65 per cent in 2016-17. A year prior to that, EPFO paid an interest rate of 8.8 per cent to its subscribers. At present, all the units employing 20 or more employees are covered under the social security schemes run by the EPFO. The Employees' Provident Funds Scheme was enforced in its entirety by November 1, 1952. According to the scheme, the employer and employee typically contribute 12 per cent of basic salary towards employee provident fund (EPF) accounts. An employee's 12 per cent contribution goes towards the EPF pool, while 8.33 per cent out of the total 12 per cent of the employer's contribution is invested in EPS or pension scheme. The balance 3.67 per cent is invested in EPF.

A look at EPF interest rates over the years:

The Rise of EPF Interest Rate:

From the year 1952-55 the EPF interest rate was 3 percent. It then increased to 3.5 per cent in 1955-57. EPF interest rate were further revised to 3.75 per cent from 1955-63. It jumped to 4 per cent in 1963-64, 4.25 per cent in 1964-65 and 4.50 per cent in 1965-66. In 1966-67, the EPF interest rate was 4.75 per cent. It constantly saw revisions and increased from 5 per cent in 1967-68 to 8 per cent in 1977-78, growing constantly over the years.

The EPF interest rate from 1979-81 was 8.25 per cent and saw constant jump and within a decade, grew to 12 per cent in 1989-90, the highest ever. EPF interest rate remained constant 12 per cent from 1989 to 2001 and after that, the decline began.

The Fall of EPF Interest Rate:

In July 2001, the EPF interest rate dropped to 11 per cent on monthly running balance from 12 per cent till June 2001. It further dropped to 9.5 per cent in 2001-02 and remained so till 2004-05. The revision in EPF interest rate came in 2005 and till 2010, the interest rate was 8.5 per cent.

Fluctuations in EPF Interest Rate:

From 2010 to 2018, the EPF interest rate has been fluctuating every year. The EPF interest rate saw a temporary rise of 9.5 per cent in 2010-11 but EPFO slashed it again to 8.25 per cent in 2011-12. In 2012-13, it was increased to 8.5 per cent and then to 8.75 per cent from 2013 to 2015. In 2015-16, the interest rate was further increased to 8.8 per cent but saw a slump in the following year to 8.65 per cent. The EPFO further slashed the interest rate and will be paying 8.55 per cent to its subscribers for financial year 2017-18.