EPFO to cut interest rate by as much as 25 bps: Reports

EPFO to cut interest rate by as much as 25 bps: Reports

The Employees’ Provident Fund Organisation (EPFO) is likely to lower interest rate by 15-25 basis points, lowering salaried workers' returns on their investments, Mint reports.

In 2018-19, the retirement fund manager had set the rate of 8.65 percent for its subscribers after seven months of discussion with the finance ministry, the report said.

The EPFO is expected to announce the interest rate by the end of January after meetings with its investment officials, executive committee members and the Central Board of Trustees.
The possible cut in the EPF annual interest rate comes amid an economic slowdown, lower yields on debt- market instruments and lower rates on similar offerings such as the public provident fund.

The EPFO will likely take these factors into account when calculating this rate for this fiscal, Mint writes.

“The economic downturn was visible this year. The falling returns on debt instruments will force the EPFO to tinker its 2019-20 payout downwards," an official told the paper.

The 10-year benchmark government securities dropped by 85-90 basis points between January 2019 and January 2020 and that would weigh on EPFO earnings, another official said.

The 15-25 basis point cut in the interest rate should not come as a surprise, the official added.