The discussion about EPF interest rate being 10% intensified when a question was asked on it in the Lok Sabha. MP Vijaykumar alias Vijay Vasanth asked the government whether it is considering increasing the interest rate of EPF to 10% and whether any study has been done on its feasibility. On this, Minister of State for Labor and Employment Shobha Karandlaje made the government’s stand clear while giving a written reply in the Parliament.
No demand for 10% interest
The government clearly said that till now no labor union has made a formal demand to increase the interest rate of EPF to 10%. That means at present there is no pressure for such an increase.
Is 10% interest possible?
The government said that the Employees Provident Fund Organization (EPFO) does not decide the interest rate just like that. It depends on the income that the EPF fund earns from its investments. That is, the interest will be decided on the basis of the return received.
Why is it difficult to pay 10% interest?
The government also said that under the EPF Scheme 1952, it is necessary that there should not be any loss in the interest account. If you understand in simple language, EPFO cannot promise to pay more interest than what it earns. If this is done then there may be pressure on the fund.
No comparison with other plans
The government also clarified that the interest rate of EPF is not compared with inflation, bank FD or other saving schemes. This is a system completely based on the earnings of your fund.
Who decides the interest rate?
The interest rate of EPF is decided by the Central Board of Trustees (CBT), which includes representatives of the government, employers and employees. That means the decision is taken together.
What should EPF subscribers understand?
Overall, there is no proposal to increase the interest rate of EPF to 10%. Rates will increase further only when investment returns are better. Therefore, at present there is little hope of a sudden big increase in interest rates.