EPFO may cut PF interest rates by 15 bps to 8.5% for FY20: Report
Earnings from long-term fixed deposits, bonds and G-Secs fell 50-80 bps over the past year and the retirement fund body may thus find it difficult to keep rates unchanged this fiscal
February 28, 2020 / 09:47 AM IST
Salaried employees may have to brace for some disappointment as the Employees’ Provident Fund Organisation (EPFO) is reportedly looking to cut interest rates on provident fund (PF) deposits.
Suffering low investment yields, EPFO is considering a rate cut of 15 basis points (100 bps=1 percentage point) to 8.5 percent in FY20 from the 8.65 percent in FY19, The Economic Times reported.
Earnings from long term fixed deposits (FDs), bonds and government securities (G-Secs) fell 50-80 bps over the past year and the retirement fund body may thus “find it difficult to keep rates unchanged this fiscal,” sources told the paper.
However, the quantum of the rate cut may be on lower side, with the article quoting a source as explaining that the government would be cautious about upsetting employee sentiment.
Moneycontrol could not independently verify the report.
The EPFO also has Rs 4,500 crore worth of investments in two troubled non-banking financial institutions (NBFCs) – Dewan Housing Finance (DHFL) and Infrastructure Leasing & Financial Services (IL&FS) – monies it is unlikely to recover any time soon due to the ongoing resolution processes for both.
Overall, the body invested Rs 18 lakh crore, of which 85 percent is in the debt market and 15 percent in equities through exchange-traded funds (ETFs). Till March 2019, its investment in equities stood at Rs 74,324 crore (recording 14.74 percent returns), the paper noted.
The Finance Investment & Audit Committee (FIAC) will take into account the body’s earnings last fiscal before arriving at a final rate cut. After this, the issue will be discussed at the EPFO’s Central Board of Trustees (CBT) -- the apex decision making body of the EPFO -- meet on March 5, the report said.