EPFO keeps interest rates on PF unchanged at 8.25%  

New Delhi: The Employees’ Provident Fund Organisation (EPFO), the state-run retirement fund manager, has decided to maintain the interest rate on provident-fund deposits for 2024-25 at 8.25%, keeping the widely watched metric of middle-class savings unchanged despite global financial uncertainties.

Provident funds provide retirement income and a financial safety net for nearly 70-million salaried Indians. It is often the key corpus of lifetime savings for the working people.

The central board of trustees of the EPFO, in a crucial meet on Friday, discussed the financial investments and projected returns of the fund manager during the rate-setting meet. Union labour minister Mansukh Mandaviya chaired the board’s meeting, which has representatives of both firms and employees’ unions.

There were demands for a slightly higher rate but the board decided to retain the existing rate due to global financial uncertainties and geopolitical risks, said TN Karumalaiyan, who is a trustee of the board from the employees’ side and the leader of the Centre for Indian Trade Unions.

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“The labour minister touched on various issues and also highlighted investment decisions, but though consensus was to retain the rate given the looming financial uncertainties in the global economy,” he said.

The decision not to lower interest rates is a welcome move for the EPFO’s subscribers, for whom provident fund is often the only means to save up for retirement. Yet, the existing interest rate is significantly lower than in 2015-16, when it was be 8.8%.

The EPFO is mandated to invest its corpus in stock markets, equities and exchange-traded funds. In November last year, the board in its 236th meeting chaired by labour minister Mandaviya, approved reinvesting 50% of its redemption proceeds from exchange traded funds (ETFs) back into equities.

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Pressured earnings 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 had paid an 8.55% interest rate. But in 2016-17, the interest rate was higher at 8.65%.

The Covid pandemic had pressured the EPFO’s earnings. Throughout 2022-23, an almost globally synchronised increase in lending rates by central banks, which has an inverse relationship with bond returns, tightened investment earnings.

The board’s decision on the interest rate on EPF deposits for 2024-25 will next be sent to the finance ministry. After the finance ministry’s concurrence, the interest earnings will be deposited in subscribers’ accounts.