EPFO may keep interest rate on deposits at 8.6%

EPFO may keep interest rate on deposits at 8.6%

NEW DELHI: Employees’ Provident Fund Organisation (EPFO) may keep interest rate unchanged at 8.65% on provident funds for its about five crore members for 2017-18 at its trustees’ meet on February 21, a source said.
The EPFO sold exchange-traded funds (ETF) worth Rs 2,886 crore earlier this month to bridge the gap to maintain 8.65% interest for this fiscal, the source said.

The EPFO had announced 8.65% rate of interest on deposits for 2016-17, lower than 8.8% in 2015- 16. It has earned a return of around 16% at Rs 1,054 crore which would be sufficient to provide 8.65% interest this fiscal.

The income projections for the current fiscal have not been circulated along with the agenda to the trustees and it would be tabled during the meeting, sources said, adding the decision to sell the ETFs was taken after factoring in the income projections for the current fiscal by EPFO.

The EPFO has been investing in ETF since August 2015 and it has so far not monetised the ETF investments. The EPFO has invested around Rs 44,000 crore in the ETFs till date.
 The agenda listed for the meeting of the trustees includes the proposal for rate of interest on the EPF deposits for the current fiscal. The trustees may also review the proposal to credit the ETFs into the members’ EPF account because a large number of members do not have that level of financial literacy.
It is proposed that the members should be given option to have ETF credits in their EPF account.
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