Provident Fund subscribers will get lower interest rate on their deposits this year as compared to last year. The provident fund body — the Employees Provident Fund Organisation or EPFO — at a meeting on Monday decided to give 8.65 percent interest rate for current fiscal year (2016-17). The move will impact over 4 crore employees who contribute part of their salary towards the Provident Fund kitty. Provident Fund subscribers had received an 8.8 percent interest on their deposits last year (2015-16).
For salaried individuals, the employee provident fund is an important tool for savings towards retirement years. Every month, a salaried individual contributes 12 percent of his/her salary to the EPF account the employer matches this. A part of the employer’s contribution goes to into Employee Pension Scheme. The lower interest rate on provident fund deposits comes in the wake of a general decline in interest rate across different financial savings instruments, including bank fixed deposits and small savings schemes. Analysts say that interest rates on fixed deposits are likely to fall further as the banks’ kitty swells after demonetisation.
Meanwhile, maintaining that most of the people by now should have deposited their demonetised currency in banks, the condition of making deposits of above Rs 5,000 only once till December 30 is aimed at reducing queues, the Finance Ministry said on Monday.