NEW DELHI: A meeting of the Central Board of Trustees of the Employees Provident Fund Organization (EPFO) in Guwahati has recommended that the interest rate on Employees' Provident Fund deposits be reduced from 8.5 per cent to 8.1 per cent for the 2021-22 financial year, thus leaving around 60 million people stranded. The rate will come into effect as per the notification issued by the Union Ministry of Labor.

This is the lowest rate since 1977-78 when the interest rate was just 8%. The interest rate was 8.8 per cent from 2015-16.

The EPFO ​​expects revenue of Rs 78,768 crore this year. By cutting interest rates, it is possible to save around 450 crore.

In March 2020, just before expansion of Covid, the rate was lowered to 8.5 per cent from 8.65 per cent in 2018-19. The rates did not change for the 2020-21 financial year due to Covid. Interest rates have never fallen below 8.25 per cent since 1977-78.

The board's recommendation was influenced by the Reserve Bank's pressure and the impact of Russia's occupation of Ukraine on the stock market.

Union Labor Minister Bhupendra Yadav, who presided over the board meeting, said that the decision was taken after reviewing the international situation and market conditions. In addition to considering social security, it is also essential to maintain market stability. At the same time, he said that EPFOs will be able to sustain their customers in the future through risk-free investment.

According to the Ministry of Labor, the EPFO's decision to monetize certain investments in the stock market has also led to a reduction in rates. The rate is based on earnings from bonds and investments in the stock market. Through long-term equity investments, EPFO ​​offers customers higher interest rates than other investments. The EPFO ​​has been taking a pro-investment stance despite declining revenues for some time. The PF will continue to attract investments with tax breaks and more, the statement said.

EPF interest rate has been reduced by central govt and it is an injustice to employees.Finance Minister Nirmala Sitharaman should intervene and withdraw this decision, said Binoy Vishvam MP.