Govt Reduces Provident Funds Interest Rate To 8.1%: This Is Lowest EPFO Rate In Last 40 Years

The government has enacted 8.1% rate of interest on employees’ provident fund (EPF) deposits for the 2021-22 fiscal – a new low after four-decade – for almost five crore subscribers of retirement fund body EPFO.

EPF interest rate reduced 

Earlier in March 2022, the Employees’ Provident Fund Organisation (EPFO) decided to bring down the interest on provident fund deposits 2021-22 to 8.1% from the 8.5% provided in the year 2020-21.

As per an EPFO office order issued on Friday, the Ministry of Labour and Employment has conveyed approval of the central government to credit 8.1% rate of interest for 2021-22 to each member of the EPF scheme.

The labour ministry had sent the proposal to the Ministry of Finance for its agreement.

Now, after the approval of the interest rate by the government, the EPFO would start crediting the fixed rate of interest for this fiscal year into the EPF accounts.

Lowest interest rate since 1977-78

The 8.1% interest rate is the lowest it has ever been since the year 1977-78, when it rested at 8%.

The interest rate of 8.5% on EPF deposits for the fiscal year 2020-21 was decided by the Central Board of Trustees (CBT) in March 2021.

The finance ministry approved it in October 2021. Thereafter, the EPFO issued directions to field offices to credit the interest income at 8.5% for 2020-21 into the subscribers’ account.

An EPFO trustee, K E Raghunathan, who represents employers, stated that the speed with which the ministries of labour and finance have cleared the interest rate is very appreciable, taking into consideration the critical need of funds in the hands of employees as it will help them meet expenses like the educational needs of their children.

In March 2020, the EPFO had decreased the interest rate on provident fund deposits to a seven-year low of 8.5% for 2019-20, from 8.65% in 2018-19.

The EPF interest rate given for 2019-20 was the lowest since 2012-13, when it was  reduced to 8.5%.

EPFO had provided the interest rate of 8.65% to its subscribers in 2016-17 and 8.55% in 2017-18.

The rate of interest was slightly higher at 8.8% in 2015-16. It had given 8.75% rate of interest in 2013-14 and 2014-15, higher than the 8.5% for 2012-13. The rate of interest was 8.25% in the year 2011-12.