Employees Provident Fund Organisation (EPFO) reduces interest rate to 8.55% for 2017-18 from 8.65% for 2016-17

Employees Provident Fund Organisation (EPFO) reduces interest rate to 8.55% for 2017-18 from 8.65% for 2016-17. Follow poutstation for latest news, gossips, entertainment and much more.

Posted 1 year ago in Regional News, updated 1 year ago.

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EPFO, the Employees’ Provident Fund Organisation (EPFO) reduced the rates of interest over a provident fund of middle-class employees from 8.65% for 2016-17 to 8.55% for 2017-18. This will affect more than 50 million active middle-class workers. This is the lowest interest rate announced since last 5 years. EPFO is a government body which regulates interest rates on the provident fund for middle class working people. It was assumed that the EPFO will maintain interest rate of last year as it had sold a portion of its investments in the exchange-traded funds (ETF) worth Rs 2,886 crore earlier this month. The reduction was officially announced after a meeting of the central board of trustees (CBT) on 21 Feb 2018. Labour secretary M. Sathiyavathy said- this is the best interest rate the body can offer by considering present market conditions. 
Labour minister Santosh Kumar Gangwar, who heads the body’s central board, said that - the interest rate payout was cut because of low returns from debt investments. Although the pension fund manager realized more than Rs1,000 crore in capital gains by selling off a part of its equity exposure, the earnings were not enough to offer a higher interest rate or even match that of the previous year. The minister also said that - On the administrative charges, he said the CBT has decided to reduce the administrative charges from 0.65 percent to 0.50 percent of total wages which are paid by employers.  
“Last year, after paying an interest rate of 8.65%, EPFO had a surplus of Rs 695 crore and this year, after paying a rate of 8.55%, the surplus was Rs586 crore,” Gangwar said, this indicates that strained finances might be a reason behind lower salaries. He further added – “Debt investments earned EPFO less than 8% return in the current fiscal.” 


When questioned why EPFO needs to maintain a surplus of Rs600 crore, EPFO financial adviser Manish Gupta said pension funds “across the globe need to maintain a health stabilizing fund”.However, employee representatives said that as per earning estimates, an 8.65% interest payout would have still left a surplus of Rs48.42 crore. 
Currently, EPFO invests 15% of its annual accruals in equities via exchange-traded funds and the rest 85% in debt instruments, including government bonds, private sector bonds, and fixed deposits. Since August 2015, when it entered the stock market, the body has invested a little over Rs44,000 crore. As of January-end, its equity investments have earned around 16% returns. 
Most of the present government decisions are affecting Middle-Class people only. The rich people or those in power are taking government’s money and running abroad. Government is making such losses from the pocket of middle-class people only. 
Such decisions can be politically harmful to the Bharatiya Janata Party-led government as it may annoy the middle class. 

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