Agencies

NEW DELHI: Retirement fund body Employees’ Provident Fund Organisation ( EPFO ) has reduced interest rate on deposits to 8.55 percent for the financial year 2017-18 following a general decline in interest rates.The decision was taken by EPFO’s central board of trustees at its 220th board meeting on Wednesday, labour minister Santosh Kumar Gangwar said. EPFO had announced an interest rate of 8.65% for 2016-17 and 8.8% in 2015-16.The move will affect around six crore subscribers and leave EPFO with a surplus of Rs 586 crore against Rs 695 crore in the previous financial year.The interest rate decided by the central board of trustees will have to be vetted by the finance ministry, following which it would be notified.EPFO had earlier this year sold Rs 3,700-crore equity shares in the market, earning a profit of Rs 1,100 crore as a result of which it was felt that the retirement fund body could retain the interest rate for the current financial year at 8.65%. However, the labour minister said this money has been used to purchase securities at higher rates.The finance ministry had last month lowered interest rate on General Provident Fund (GPF) and Public Provident Fund (PPF) to 7.6% to be effective from January 1, 2018, much below the returns on provident fund deposits. This has widened the gap and has made PF more lucrative as an option for employees.EPFO has earned a cumulative return of 20.65% on its equity investment till December.EPFO has invested 15% of its incremental income in ETFs amounting to Rs 44,000 crore so far. The retirement fund body’s central board of trustees, chaired by the labour minister, has also agreed to lower the threshold limit of employees from 20 to 10 for an establishment to be covered under EPFO.The decision is significant as the labour ministry estimates that it would add another 3 crore to its subscriber base. However, this would require an amendment to the The Employees’ Provident Funds And Miscellaneous Provisions Act.“Besides, we have reduced the administrative charges from 0.65% to 0.5% to ensure that the benefits of savings and efficiency of EPFO are passed on to the employees,” said Gangwar after nearly four-hourlong meeting.According to the labour ministry, there are objections to the budget proposal of allowing new women employees to contribute only 8% of their wage against 12% now.“We have noted their view on this and a decision will be taken,” labour secretary M Sathiyavathy said, adding that it would also require amendment to the EPF Act.The central board of trustees of EPFO comprises representatives of trade unions, employers as well as central and state governments.