EPF Rate Cut From 9.5% to 8.25%, Deepest Rate Cut in Decade

Government on 15th March has slashed interest rates on Employee Provident Fund (EPF) deposits to 8.25% from 9.5% for 2011-12 affecting over 4.7 crore subscribers in India. It is observed that this is the deepest rate cut over a decade and in effect means that the interest rate on Employee Provident Fund is now lower than that on Public Provident Fund (PPF), National Savings Certificates (NSCs) which have been raised to 8.6% and fixed deposits that raised to 9%.

The Employees’ Provident Fund Organisation (EPFO) found that it had Rs.1,731 crore surplus, when it provided 9.5% interest rate to its subscribers for 2010-11. In general for this fiscal, the Labour Ministry has recommended 8.6% rate of interest on Provident fund deposits to EPFO subscribers. According to EPFO, a provision of 8.25% interest on EPF for 2011-12 would leave a deficit of Rs.24 lakh.

While the EPFO trustees had suggested payment of interest at the rate of 8.25% for 2011-12, the trade union members insisted that it should be retained at 9.5%. Also, the representatives of employers desired the interest rate to be fixed at 8.5%.

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