The Employees Provident Fund Organisation (EPFO) on Thursday cut the interest rate on provident fund deposits to a seven-year low of 8.5 per cent for the current financial year.
The rate for 2018-19 had been 8.65 per cent. The rate for 2019-20 is the lowest since 2012-13, when it was 8.5 per cent.
In spite of the cut, announced by Union labour minister Santosh Gangwar after a meeting, the interest rate is higher than that on several other long-term investment schemes. The Public Provident Fund offers an interest rate of 7.9 per cent. However, the Post Office Senior Citizen Savings scheme offers 8.6 per cent.
The finance ministry has been nudging the labour ministry for aligning the EPF interest rate with those of other small-saving schemes run by the government.
The EPFO will have a surplus of over Rs 700 crore if the rate is kept at 8.5 per cent, an official said. He put the surplus at Rs 300 crore had the rate been pegged at 8.55 per cent. Above 8.55 per cent, the EPFO would have ended up with a deficit, the official said.
