EPFO is an autonomous body and provides interest on EPF deposits from its own income.
New Delhi: The government has approved 8.65 per cent interest on EPF deposits for 2016-17 which would be credited into the accounts of members of the retirement fund body EPFO.
The Employees Provident Fund Organisation (EPFO) has asked its field offices to credit 8.65 per cent rate of interest into the accounts of subscribers after the Labour Ministry informed the body about approval in this regard by the central government, a senior official said.
Earlier this month, Labour Minister Bandaru Dattatreya had said that the Finance Ministry had approved 8.65 per cent rate of interest on EPF deposits for 2016-17.
There were apprehensions among formal sector workers that they would get a lower rate of interest than the 8.65 per cent approved by the EPFO trustees in December last year.
"Finance Ministry has agreed to 8.65 per cent rate of interest. Now, the communication will come. The formal discussions are over. We will immediately issue the notification and credit the rate of interest to over four crore subscribers," the minister had said.
The Employees' Provident Fund Organisation trustees had approved 8.65 per cent rate on EPF in December last year.
The Finance Ministry has been nudging the Labour Ministry to lower the EPF rate for aligning it with the rates of small savings schemes like PPF. Dattatreya has been maintaining that EPFO subscribers be provided 8.65 per cent rate of interest for 2016-17.
As per the practice, the board's decision is concurred by the Finance Ministry after evaluating whether the EPFO would be able to provide the rate approved by trustees through its own income or not.
Once the Finance Ministry ratifies the rate of interest approved by the Central Board of Trustees (CBT), it is credited into the accounts of EPFO members for that particular financial year.
The Finance Ministry had last year decided to lower the EPF interest rate to 8.7 per cent from 8.8 per cent approved by the CBT for 2015-16. The decision drew flak from all quarters forcing the government to uphold 8.8 per cent rate.
The Finance Ministry has been asking the Labour Ministry to rationalise the EPF interest rate in view of lowering of returns on various administered savings schemes like PPF.
The government generally ratifies the rate of return approved by the CBT because the EPFO is an autonomous body and provides interest on EPF deposits from its own income.