EPFO keeps interest rate at 8.25% for FY25, benefiting 300 million members
New Delhi, Feb 28, 2025
This comes against the backdrop of ebbing stock markets and bond yields in the current financial year
Central Board of Trustees (CBT) - the apex decision making body of the Employees Provident Fund Organisation (EPFO) on Friday kept the interest rate on the retirement savings accumulated by its nearly 300 million members unchanged at 8.25 per cent for the financial year 2024-25 This comes against the backdrop of ebbing stock markets and bond yields in the current financial year.
The meeting was chaired by Union labour and employment minister Mansukh Mandaviya.
Earlier in FY24, the social security organisation had raised the interest rate to 8.25 per cent from 8.15 per cent in FY23. In FY22, the interest rate had plunged to a four-decade low of 8.1 per cent.
The ministry of labour and employment will now send the interest rate recommendation to the finance ministry for ratification. After the finance ministry’s consent, the EPFO will start crediting the interest for the current financial year to its subscribers.
However, the sustainability of the high interest rates announced by the EPFO has been questioned several times by the finance ministry in the last few years. The finance ministry has nudged the EPFO to reduce the interest rate in line with the overall interest rate scenario, as it continues to offer the highest interest rate among other savings instruments.
The social security organisation has nearly 70 million contributing active members.
“EPFO was left with a surplus of Rs 5,300 crore at this rate of interest. The idea is to set aside some money to deal with emergencies as and when they arise,” said one of the CBT members who attended the meeting, requesting anonymity.
Besides, the board also approved key modifications to the insurance benefits under the Employees’ Deposit Linked Insurance (EDLI) scheme. These include a minimum benefit introduced for death within one year of service. This amendment is expected to result in higher benefits for more than 5,000 cases of deaths in service every year. Also, if a member passes away within six months of their last contribution received, the EDLI benefit will be admissible, provided the member’s name is not struck off the rolls. The modification is estimated to result in benefits for more than 14,000 such cases every year.
Moreover, the CBT was also apprised of the successful implementation of the centralised pension payment system (CPPS) across all regional offices (ROs) from January 2025. Under this system, during January, pensions for 6.93 million pensioners amounting to Rs 1,710 crore were disbursed through CPPS.
“The issue of pension on higher wages and its compliance with the Supreme Court order was also discussed. The Board was informed that EPFO is working on a mission mode, and 72 per cent of the 1.7 million applications have been processed so far,” added the member.
[The Business Standard]
