On Tuesday, the Labor Ministry notified 8.65% interest rate on Employees' Provident Fund (EPF) for the 2018-19 financial year.
Earlier there was a disagreement between the Labor and Finance Ministries over raising the EPF interest rate by 10 basis points from 8.55% in 2017-18.
However, Labor Minister Santosh Gangwar said the Finance Ministry gave its recommendation following which, the new rate has been notified.
Received Finance Ministry's concurrence on September 19: Gangwar
According to PTI, the Labor Minister said, "This rate of interest (8.65%) was approved by the EPFO's apex decision making body Central Board of Trustees on February 22, 2019."
The minister added, "We received the concurrence of the Finance Ministry on September 19, 2019. Thereafter, the Labor Ministry issued a notification for providing 8.65% rate of interest for 2018-19."
Rs. 54,000 crore to be credited in EPFO subscriber accounts
The minister further said that this decision will enable crediting the interest amount of Rs. 54,000 crore into accounts of over 6 crore Employees' Provident Fund Organization (EPFO) subscribers for the financial year 2018-19.
8.65% first proposed in February; Finance Ministry raised objections
The update ends a seven-month-long wait as the Central Board of Trustees (CBT), EPFO's apex decision-making body, first recommended hiking the EPF interest rate to 8.65% back in February.
As per convention, the proposal needed to be ratified by the Finance Ministry.
However, the Finance Ministry objected to the proposal, wanting EPFO to reduce the rate by at least 10 basis points.
Despite hike, EPFO would be left with Rs. 151cr surplus
Since the Finance Ministry didn't give a green light to the proposal, the Labor Ministry's notification got delayed and hence the EPFO failed to credit withdrawal claims at 8.65% rate into its subscribers' accounts.
Last week, Gangwar had said that Finance Minister Nirmala Sitharaman "doesn't disagree" with the hike.
Even with the 8.65% payout, the EPFO would be left with Rs. 151.67 crore surplus.