The Employees' Provident Fund Organization (EPFO) on Thursday announced a hike of 0.1% in the interest rate on employees' provident fund (PF) deposits for FY 2018-19.
After the hike by the retirement fund body, the PF interest rate will increase to 8.65% from 8.55% in FY18.
As many as over 6 crore subscribers of EPFO will benefit from the interest hike.
CBT finalizes interest rate on employees' provident fund deposits
The Central Board of Trustees (CBT) is the highest decision-making body of the EPFO. CBT is responsible for finalizing the interest rate on employees' provident fund deposits for a financial year.
CBT is headed by Labor Minister Santosh Gangwar. After CBT's approval, the proposal needs to be approved by the Financial Ministry following which the interest is credited into the EPFO subscribers' accounts.
Proposal will go to Finance Ministry for approval: Gangwar
Santosh Gangwar said that all the members of the EPFO's CBT at the meeting on Thursday agreed to hike the EPF interest rate for subscribers for the current financial year. The proposal would now be sent for the Finance Ministry's approval, the Labor Minister added.
EPFO provided five-year-low interest rate of 8.55% last fiscal
For the last fiscal, the EPFO provided an interest rate of 8.55% - a five-year-low rate of interest - on the employees' PF deposits for FY18.
The retirement fund body kept the rate at 8.65% for FY17 while the interest rate was 8.8% for FY16.
It provided an interest rate of 8.75% for FY15 as well as FY14. The rate for FY13 was 8.5%.
EPFO manages retirement savings of over Rs. 11 lakh crore
The subscribers of EPFO contribute 12% of their basic salary every month as a mandatory EPF contribution toward a retirement corpus with a matching 12% contribution by their employees. With over 6 crore subscribers, EPFO manages retirement savings of more than Rs. 11 lakh crore.
Move in line with the Modi government's populist announcements
The move to hike the EPF interest rate is in line with the Narendra Modi-led government's other populist announcements, including the populist Interim Budget, ahead of the upcoming Lok Sabha elections.
Demands have been made for an increase in the pension amount for EPFO subscribers after the government announced a Rs. 3,000 monthly pension scheme for workers in the unorganized sector.