PF Interest Rate 8.25% for the year 2011-2012 and EPFO Circular

Days before Union Budget 2012-13, Finance Minister Pranab Mukherjee took a bold decision to reduce the rate of interest on deposits in the Employees’ Provident Fund to 8.25 per cent for 2011-12. This is the single largest rate cut in over a decade and would be 1.25 per cent lower than the 9.5 per cent interest rate enjoyed by EPFO's 4.7 crore subscribers in 2010-11.

While the EPFO had recommended last December a lower interest rate to its apex decision making body, the Central Board of Trustees, it had failed to take a decision. Instead, it had referred the issue to the finance ministry to take a call on the rate of interest, suggesting three different rates ranging between 9.5 per cent and 8.25 per cent.

Arguing for the 8.25 per cent interest rate, the EPFO had said this would result in a deficit of a mere Rs 24 lakh against its earnings. It had further pointed out that an 8.5 per cent rate of return for subscribers would translate into a deficit of Rs 526.44 crore. Trade union leaders had, however, pitched for 9.5 per cent on grounds that the EPF could not give a return lesser than the 8.6 per cent given the Public Provident Fund Scheme.

''It is to inform that the Ministry of Labour and Employment has conveyed the approval of the Central government to credit interest at 8.25 per cent for the year 2011-12 to the account of each member of the scheme. You are accordingly requested to issue necessary instructions to all concerned for crediting the interest to the members’ accounts,'' the EPFO has directed its filed offices in an internal circular issued last evening.

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