The credit of 8.15 percent to its subscribers will be paid by EPFO for 2019-20 for now, lower than 8.5 percent it had decided upon in March.
On Wednesday, the Employees’ Provident Fund Organisation (EPFO) decided to credit interest rate to formal sector workers for 2019-20 in a staggered manner, citing the coronavirus pandemic’s impact on its income, Business Standard reported.
The credit of 8.15 percent to its subscribers will be paid by EPFO for 2019-20 for now, lower than 8.5 percent it had decided upon in March.
“The remaining 0.35 percent will be credited in December after redemption of the EPFO’s equity investments,” a member of the central board of trustees (CBT) of the EPFO said.
A member, requesting the anonymity, said EPFO is staring at a shortfall of Rs 2,500 crore in 2019-20 if it gives out the interest rate of 8.5 percent to its subscribers at one go.
This decision was taken on Wednesday in the EPFO’s central board of trustees meeting chaired by labor and employment minister Santosh Kumar Gangwar.
EPFO had credited returns of 8.65 percent to its subscribers in the previous financial year. Compared to that, the interest rate of 8.5 percent was already a seven-year low.
Official data presented in the CBT meeting showed that EPFO’s investments in the equity markets yielded negative returns in 2019-20. The invest accrued return of -8.3 percent for the fiscal, down from 14.7 percent in the previous fiscal, Business Standard reported.
The coronavirus pandemic coupled with an unprecedented sell-off has eaten into 2019-20 equity returns for almost all investors.
In 2019-20, EPFO made an investment of Rs 31,501 crore in exchange-traded funds (ETFs), compared to Rs 27,974 crore invested in the previous fiscal year.
It also got lower returns on investment in government securities.
The labor ministry will notify the new interest rate after getting approval from the finance ministry.
According to EPFO’s earlier projections, it had shown that by agreeing to give an interest rate of 8.5 percent in March, it would have been left with a surplus of around Rs 700 crore.
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