The interest rate paid on employee provident fund has been raised to 8.25 per cent for the financial year ending March 31 — the highest in three years — offering a potential pre-election sweetener to voters.

The central board of trustees of the Employees’ Provident Fund Organisation (EPFO) recommended to the finance ministry to raise the interest rate for nearly 8 crore contributing subscribers, the labour ministry said in a statement.

The EPFO recommended a 10 basis points increase to 8.25 per cent interest rate for 2023-24 from 8.15 per cent in 2022-23. This is the highest rate since 2019-20 when an 8.5 per cent interest was paid.

The rate of payout was maintained at the same level in 2020-21 but in the following year (2021-22) it was cut to 8.1 per cent, the lowest in four decades. The EPF interest rate was 8 per cent in 1977-78.

The interest rate was marginally hiked to 8.15 per cent in 2022-23.

EPFO had provided an 8.65 per cent interest rate to its subscribers in 2016-17 and 8.55 per cent in 2017-18. The rate of interest was slightly higher at 8.8 per cent in 2015-16.

The retirement fund body had given an 8.75 per cent rate of interest in 2013-14 as well as 2014-15, higher than 8.5 per cent for 2012-13. The rate of interest was 8.25 per cent in 2011-12.

Analysts said the decision comes ahead of general elections in April-May, raising concerns about political motivations. While the EPFO’s strong financial performance supports the increase, the move’s long-term sustainability is unclear.

The recommendation for 2023-24 fiscal will now go to the finance ministry and once it approves the hike, the EPFO will credit the rate of interest to the subscribers.

According to the labour ministry statement, the decision to hike the interest rate for 2023-24 was taken at the 235th meeting of the Central Board of Trustees (CBT) of the EPFO on Saturday, under the chairmanship of Union labour and employment minister Bhupender Yadav.

For FY2024, the board recommended distribution of Rs 1,07,000 crore to EPF members’ accounts on a total principal amount of Rs 13 lakh crore, which was Rs 91,151.66 crore and Rs 11.02 lakh crore, respectively, in 2022-23.

Total income recommended for distribution is the highest on record.

Compared with the previous financial year, there has been significant growth, the statement said, adding that the income grew by more than 17.39 per cent, while the principal amount increased by 17.97 per cent. This suggests a healthy financial performance and potentially strong returns for the members, it stated.

Meanwhile, the Employees’ State Insurance Corporation (ESIC) has decided to extend medical benefits to superannuated insured persons with relaxed norms.

The decision was taken at the 193rd meeting of the ESIC, a labour ministry statement said.