On Saturday (10th February), the Employees’ Provident Fund Organisation (EPFO) recommended a hike in the interest rate on deposits under the Employees Provident Fund (EPF) scheme for the financial year 2023-2024. As per the recommendations, the retirement fund body fixed a three-year high-interest rate of 8.25% on EPF deposits for FY 2023-24.
The recommendation to hike the EPF interest rate was proposed in the Central Board of Trustees (CBT) meeting – the highest decision-making body held on Saturday.
A source said, “The EPFO’s apex decision-making body, Central Board of Trustees (CBT), has decided to provide an 8.25 percent rate of interest on EPF for 2023-24 at its meeting on Saturday.”
Last year in March, the EPFO had increased the interest rate on EPF from 8.1% in 2021-22 to 8.15% for FY 2022-23.
Following the CBT’s recommendation to grant a three-year high interest rate, it will be sent to the Ministry of Finance for approval. After receiving the ratification from the Union government, the interest rate on EPF for FY 2023-24 will be credited into accounts of over six crore subscribers of EPFO.
Pertinent to note that EPFO provides the rate of interest only after receiving ratification from the government through the finance ministry.
As per the convention, first, the CBT of EPFO decides on key issues like the interest rate to be provided to its subscribers which is based on the projected income of the retirement fund manager. Then, CBT’s recommendations are forwarded by the Ministry of Labour and Employment to the Ministry of Finance for their ratification. After the Finance Ministry’s concurrence, the EPFO notifies about the interest rate for that financial year and starts crediting the rate of interest to the EPF subscribers.
EPF
The Employees Provident Fund (EPF) is a compulsory contribution for salaried employees, and employers are required to match this contribution to the EPF account. Every month, employees contribute 12% of their earnings to their EPF account, and the entire contribution is deposited into the account. With 70.2 million contributing members and 0.75 million contributing establishments, the EPFO is the largest retirement fund manager in the country.
When compared to other savings instruments, the EPFO rate remains one of the highest. For example – small savings rates range from 4.0% to 8.2%.