EPFO may hike interest rate on employees’ provident fund: Report

The Employees' Provident Fund Organisation (EPFO) may raise interest rates from the current level of 8.55 percent, according to a Mint report.

There is a good chance the rate would be hiked, three officials told the paper. They added that the authority may at least retain the existing interest level given the steep fall in inflation.

The annual internal review, where EPFO decides the interest rate, is yet to be concluded owing to the ongoing account audit.

"We are exploring whether we can offer an interest rate of over 8.55 percent for FY19. Reduction in the rate is a complete no at this point in time, though the final calculation and accounts audits are still on," Prabhakar Banasure, a member of EPFO's central board of trustees, told the paper.

Even at the unchanged rate, it would be one of the most rewarding savings schemes in FY19.

The move would bring cheer to over 60 million employees in the organised sector. According to the report, this would serve as a sop for the salaried class ahead of the 2019 general elections.

The EPF interest rate for FY19 would be in line with the government's recently announced incentives such as a nearly 50 percent hike in incentives for front line health workers, including those working at Integrated Child Development Scheme centres (anganwadis). The government has also made the National Pension System (NPS) withdrawals tax-free.

Also read: EPFO may give subscribers option to increase stock investments in new year

According to the report, the average interest rate of the Public Provident Fund and the National Savings Certificate in 2018 was 7.7 percent while leading ultra short term debt funds returned an average of 7.78 percent.

"2018 has been a relatively low-yielding year for debt investments, but the EPFO is unlikely to revise the interest rate downward for 2018-19 from what it paid last fiscal," one of the officials cited above told the paper. The last round of calculations are on before announcing the EPF rate in late January, the official added.

The body had a surplus of Rs 600 crore last year when the retirement body offered an 8.55 percent, the newspaper reported.

The EPFO's equity investments have a notional return of around 12 percent and might be used if required, another official said.