EPFO to Pay 8.5% Interest For FY20 in two Installments

EPFO fails to pay interest on time – The Employees’ Provident Fund Organisation (EPFO) decided to postponed the credit interest rate to formal sector workers for 2019-20 under installments, citing the coronavirus pandemic’s impact on its return on investments. But in actual this was due to negative return from the stock markets.

The EPFO’s investments in the equity markets yielded negative returns in 2019-20, official data presented in the CBT meeting showed. The investments accrued return of -8.3% for the fiscal, down from 14.7 per cent in the previous fiscal. The unprecedented selloff in March, triggered by the Covid-19 pandemic, has eaten into 2019-20 equity returns for almost all investors.

The EPFO made an investment of Rs 31,501 crore in exchange-traded funds (ETFs) in 2019-20, compared to Rs 27,974 crore invested in the previous fiscal year. The EPFO also got lower returns on its investments in government securities.

The EPFO will credit 8.15 per cent to its subscribers for 2019-20 for now and the remaining 0.35 per cent will be credited in December after redemption of the EPFO’s equity investments.

The EPFO is staring at a shortfall of Rs 2,500 crore in 2019-20 if it gives out the interest rate of 8.5 per cent to its subscribers at one go.

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EPFO Pay Interest in Installments – The decision was taken in the EPFO’s central board of trustees meeting chaired by labour and employment minister Santosh Kumar Gangwar.

The interest rate of 8.5 per cent was already a seven-year low and the EPFO had credited returns of 8.65 per cent to its subscribers in the previous financial year.

If the EPFO is unable to credit the remaining 0.35% of interest rate in December this year, it will be the lowest returns that the fund’s subscribers will get since 1977-78. The EPFO had given an interest rate of 8 per cent in 1977-78.

The interest rate will be notified by the labor ministry after getting approval from the finance ministry.