After the Reserve Bank reduced the repo rate, there is a possibility of reduction in the interest rates of banks, but the interest rate on the Employees Provident Fund (EPF) is expected to remain unchanged this year. The Ministry of Labor has indicated that the interest rate will remain stable at 8.25% in the current financial year. There is no possibility of any major decline in it even in 2024-25.
After the Reserve Bank reduced the repo rate after a long time, the reduction in interest rates by the banks is considered certain sooner or later, but it is not expected to affect the Employees Provident Fund (EPF) interest at least this year.
According to the indications received from the Ministry of Labor, even if the interest rate may not increase in the current financial year, there is no possibility of a decrease in it compared to last year. This clearly means that there will be stability in EPF investment in the current financial year and it is almost certain that 8.25 percent interest will be given on EPF in 2024-25. An official decision on the EPF interest rate for the current year will be taken in the meeting of the Central Board of Trustees (CBT) of the Employees’ Provident Fund Organization next week.
Speculation of impact on EPF interest as well
According to sources, after fully estimating its income and expenditure for the year 2024-25, EPFO has completed discussions with the Ministry of Labor regarding the proposed interest rate. After the Reserve Bank’s repo rate cut, in view of the possibility of banks cutting interest rates on investment deposits and loans, speculations started being made that it would also affect EPF interest.
However, in the case of interest on EPF, which is considered the biggest umbrella of social security, the Ministry of Labor is not in favor of taking a decision based on the repo rate of the last two months of the current financial year. Recently, EPFO presented a detailed statement of its income and expenditure of the current year to the Ministry of Labor, including current and future investments. It is understood that in the meeting held with EPFO on this issue, Labor Minister Mansukh Mandaviya also expressed the opinion of maintaining stability in interest on EPF. Repo rate also reduced by 0.25 percent
EPF currently has more than 6.5 crore members and politically EPF interest is always a sensitive issue. However, in September last year, in view of the boom in the capital market and banks giving more than eight percent interest on fixed deposits, there was a possibility of giving 8.40 percent interest on EPF during the current year in the ministry. But the capital market has been facing huge fluctuations for the last five months and the repo rate has also been reduced by 0.25 percent.
In such a situation, it is important to maintain 8.25 percent on EPF this year like 2023-24. The Ministry of Labor has given its approval to the interest rate proposal of EPFO, which will be considered and decided in the CBT meeting on February 28. The CBT itself approves the proposal to fix the interest rate. The Finance Ministry takes the final decision on the recommendation of the CBT. Generally, the recommendations of the CBT are approved by the Finance Ministry and only after this, the interest amount for the current year on EPF is deposited in the members’ account.
