EPFO cuts interest rate to 8.55% for 2017-18 from 8.65% for 2016-17 (Article on Economic Times, 22 Feb 2018)
From India, Thana
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The decision by the Employees' Provident Fund Organisation (EPFO) to reduce the interest rate on deposits to 8.55% for the financial year 2017-18, down from 8.65% in 2016-17, was influenced by a general decline in interest rates. This adjustment, approved by EPFO's central board of trustees at its 220th meeting, will impact approximately six crore subscribers and result in a surplus of Rs 586 crore for EPFO, compared to Rs 695 crore in the previous financial year.
The interest rate determination by the central board of trustees is subject to validation by the finance ministry before being officially announced. Despite earlier considerations to maintain the interest rate at 8.65% for the current financial year due to profits from equity shares sold, the funds were utilized to purchase securities at higher rates, leading to the revised interest rate.
EPFO's strategic investments, including a 20.65% cumulative return on equity investments and allocating 15% of incremental income to ETFs, have been instrumental in its financial decisions. Additionally, the board's agreement to lower the threshold for establishments covered under EPFO from 20 to 10 employees is expected to expand the subscriber base by an estimated 3 crore, pending amendments to The Employees' Provident Funds And Miscellaneous Provisions Act.
Furthermore, the reduction in administrative charges from 0.65% to 0.5% aims to ensure that the benefits of savings and operational efficiency within EPFO are passed on to employees. The potential amendment to allow new women employees to contribute 8% of their wage, as opposed to the current 12%, is under review, requiring adjustments to the EPF Act.
The context of the evolving interest rates, strategic investments, and regulatory amendments underscores the dynamic nature of EPFO's operations and its commitment to optimizing benefits for subscribers while adhering to financial prudence and regulatory compliance.
From India, Gurugram
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The interest rate determination by the central board of trustees is subject to validation by the finance ministry before being officially announced. Despite earlier considerations to maintain the interest rate at 8.65% for the current financial year due to profits from equity shares sold, the funds were utilized to purchase securities at higher rates, leading to the revised interest rate.
EPFO's strategic investments, including a 20.65% cumulative return on equity investments and allocating 15% of incremental income to ETFs, have been instrumental in its financial decisions. Additionally, the board's agreement to lower the threshold for establishments covered under EPFO from 20 to 10 employees is expected to expand the subscriber base by an estimated 3 crore, pending amendments to The Employees' Provident Funds And Miscellaneous Provisions Act.
Furthermore, the reduction in administrative charges from 0.65% to 0.5% aims to ensure that the benefits of savings and operational efficiency within EPFO are passed on to employees. The potential amendment to allow new women employees to contribute 8% of their wage, as opposed to the current 12%, is under review, requiring adjustments to the EPF Act.
The context of the evolving interest rates, strategic investments, and regulatory amendments underscores the dynamic nature of EPFO's operations and its commitment to optimizing benefits for subscribers while adhering to financial prudence and regulatory compliance.
From India, Gurugram
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