New Delhi: Finance Minister Nirmala Sitharaman on Monday defended a proposal to cut interest rate paid on employees' provident fund deposits to over four-decade low of 8.1 per cent, saying the rate is dictated by today's realities where interest rate on other small saving instruments was even lower.
Replying to a debate in the Rajya Sabha on the supplementary spending for the current fiscal, she said the decision to lower interest rate was taken by the central board of the provident fund managing body, EPFO, which has representatives of all stakeholders including employees' unions.
Her ministry is the nodal authority for approving the recommendation of the Central Board of Trustees of Employees' Provident Fund Organization (EPFO).
"EPFO has a central board which is the one which takes the call on what rate has to be given...and they have not changed it for quite some time. They have changed it now...to 8.1 per cent," the Finance Minister said.
The minister further said that it is a decision taken by the EPFO Central Board which has a wide spectrum of representatives in it.
The rate was 8.5 per cent for 2020-21. The EPFO earlier this month, decided to lower the interest rate to a four-decade low of 8.1 per cent for 2021-22.
Sitharaman cited the comparative prevailing interest rates of other schemes saying Sukanya Samriddhi Yojana offers 7.6 per cent, Senior Citizen saving scheme (7.4 per cent) and PPF (7.1 per cent), while SBI's 5-10 year fixed deposits attract 5.50 per cent interest rates.
"With all this, the EPFO has taken a call to give 8.1 per cent (interest rate)," she said.
She added that for 40 years the EPFO rates have not been brought down.
"Yes, 40 years. There are today's realities which do keep us in the context of decisions taken by the Central Board of EPFO. It is yet to come to Finance Ministry for approval, but the fact remains that these are the rates that are prevailing today and it (EPFO) is still higher than the rest of them," she said.
Later, the House returned a money bill moved by Finance Minister Nirmala Sitharaman, authorising the government for payment and appropriation of certain sums from the Consolidated Fund for the financial year 2021-22.
The Upper House of Parliament also returned another Appropriation Bill for the expenditure done in the 2018-19 financial year.