"The finance ministry is of the view that the interest rate on EPF should be closer to the rates being offered to subscribers of the General Provident Fund," one of the officials said. The government recently slashed the interest rate on General Provident Fund by 80 basis points to 7.1% for Apr-Dec.
The recommendation of the finance ministry is about 120 bps lower than what was recommended by the Central Board of Trustees of the EPF. The board had last month recommended cutting the interest rate on the fund by 15 bps to 8.50% for 2019-20. The government is likely to notify the revised rate of about 7.30% after the lockdown is lifted on May 3, the second official said. The recommendation of the central board has to be ratified by the finance ministry for it to be credited into the accounts of subscribers. At 7.3%, the interest rate on EPF in 2019-20 will be the lowest in about four and a half decades.
The last time the interest rate on EPF was lower than 7.30% was in 1975-76, when it was 7.00%. Some trade union members who are part of the board have opposed the move, saying there is a need pay higher interest at a time when people are facing a cash crunch, the second official said. In 2018-19, the finance ministry had ratified the interest rate recommended by the board after a delay, as it was not convinced that the provident fund had sufficient surplus to pay higher interest.
Earlier, a government official had said that the provident fund would be left with a surplus of 10 bln rupees at 8.40% interest rate, while an interest rate of 8.65% would leave it in deficit. The EPF is the largest non-governmental provident fund in the country with a total corpus of 11.97 trln rupees at the end of March 2019.
