Coronavirus impact: EPFO to pay 8.5% interest in two installments
The Employees' Provident Fund Organisation (EPFO) will pay the 8.5% interest for the fiscal year 2019-20 to EPF subscribers in two installments, the retirement fund body's central board said on Wednesday. The EPFO said that its expected earnings were impacted by the coronavirus pandemic and some of the investments could not be encashed. Here are more details.
8.15% interest to be credited first; rest in December
The EPFO will credit 8.15% interest on EPF into the subscribers' accounts first and the remaining 0.35% will be credited in December. According to the retirement fund body's calculations, it will be left with a surplus of Rs. 700 crore after the disbursement for this fiscal. In the previous fiscal, it had a surplus of around Rs. 349 crore.
Some investments could not be encashed: Central board trustee
A central board trustee of the EPFO, Virjesh Upadhyay, told Mint, "There is no going back on 8.5% rate for FY20, but the current situation has pushed us to go for two installments. Some of the investments could not be encashed due to bad market situation, hence this new formula." The 8.5% interest rate had been announced by the EPFO in March.
8.5% interest rate lowest in 7 years
Compared to the payout for FY2018-19, the 8.5% interest rate is 15 basis points lower. This marks the lowest interest rate in seven years after the EPFO paid an 8.5% rate in 2012-13. This impacts the earnings of over 50 million active subscribers.
EPFO's earnings lower than expected
The EPFO's earnings in March were lower than expected. Back in March, it had estimated an income between Rs. 3,500-4,000 crore from dividends and sale of exchange-traded funds. While speaking to Mint, an EPFO official said the retirement fund body's income had declined due to the pandemic, however, they refused to comment on the course of action if the downward trend continued.