Retirement fund body EPFO retains 8.25% interest rate on employees’ provident fund:
The Employees’ Provident Fund Organisation (EPFO), the statutory body responsible for managing the retirement savings of millions of employees in India, has decided to maintain the interest rate on employees’ provident fund (EPF) deposits at 8.25 percent for the financial year 2024-25. This decision was taken during a meeting of the EPFO’s apex decision-making body, the Central Board of Trustees (CBT), held on Friday, according to sources familiar with the matter.
In the previous financial year (2023-24), the EPFO had marginally increased the interest rate on EPF deposits to 8.25 percent, up from the 8.15 percent provided for the year 2022-23. The decision to retain this rate for 2024-25 indicates a measure of stability in the interest earnings for the over seven core subscribers of the EPFO.
The interest rate on EPF deposits has witnessed fluctuations over the years. In March 2022, the EPFO significantly lowered the interest rate on EPF deposits for the financial year 2021-22 to 8.1 per cent. This marked a historic low, as it was the lowest interest rate provided in more than four decades. The last time the interest rate had dropped to such a level was in 1977-78 when it stood at 8 per cent. This reduction was in contrast to the higher interest rate of 8.5 percent provided for 2020-21.
The EPFO’s decision-making process follows a structured protocol. Once the CBT finalizes the proposed interest rate, it is sent to the Ministry of Finance for formal approval. The interest rate for 2024-25 will undergo the same process. Upon receiving ratification from the government, the interest earnings at the approved rate will be credited into the accounts of all EPFO subscribers. This ensures that the statutory compliance and financial oversight mechanisms are duly followed before disbursing the interest.
Historically, EPFO interest rates have varied based on economic conditions and financial performance. In March 2020, the EPFO reduced the interest rate on provident fund deposits to 8.5 per cent for the financial year 2019-20, marking a seven-year low. This was a decline from the 8.65 percent provided in 2018-19. In previous years, the interest rates offered to subscribers were slightly higher. The rate for 2016-17 was 8.65 per cent, followed by a minor reduction to 8.55 per cent in 2017-18.
Going further back, the interest rate stood at 8.8 percent for the financial year 2015-16. During the financial years 2013-14 and 2014-15, the EPFO provided an interest rate of 8.75 percent, which was an increase from the 8.5 percent in 2012-13. The rate was 8.25 percent in 2011-12, which is the same as the current rate set for 2024-25.
The EPFO plays a crucial role in safeguarding the financial future of employees, ensuring that their retirement savings grow steadily over time. By maintaining a stable interest rate at 8.25 percent for two consecutive years, the organization aims to provide consistent and predictable returns to its members. However, external economic factors, investment returns, and government policy decisions continue to influence the interest rate trends on EPF deposits. Moving forward, EPFO subscribers will keenly await the formal approval of the Ministry of Finance to receive their credited interest for the financial year 2024-25.
