Retirement fund body EPFO on Thursday decided to retain the annual rate of interest on provident fund deposits at 8.5 per cent for the current financial year.

The central board of trustees, the decision-making body on the rates, met in Srinagar on Thursday, to set the rates for its more than five crore active subscribers.

The rates will now be placed before the finance ministry for its approval, following which they will be credited into the account of the subscribers. The rates are the lowest since 2012-13 when the EPFO had also paid out 8.5 per cent. The EPFO had given 8.75 per cent rate of interest in 2013-14 as well as 2014-15. It had paid higher rates since till 2018-19. (See chart).

“The Central Board of Trustees recommended 8.50 per cent annual rate of interest to be credited on EPF accumulations in members' accounts for the financial year 2020-21,” a labour ministry statement said.

The ministry said the EPFO decided to liquidate investment in equities. The interest rate is combined income from interest received from debt and the income from equities.

“This has enabled EPFO to provide higher return to its subscribers and still allowing EPFO with healthy surplus to act as a cushion for higher return in the future also. There is no over-drawal on EPFO corpus because of this income distribution.”

EPFO trustee K.E. Raghunathan said they would have a surplus of Rs 300 crore on maintaining the interest rate at 8.5 per cent in the last fiscal.

“The income for the distribution of interest rate stood at Rs 70,500 crore. The exchange-traded funds purchased in the first two quarters of 2017 are being liquidated, which has led to an income of over Rs 4,000 crore,” he said.