EPFO ‘Will’ Pay 8.5% Interest to 60 Million Subscribers As Promised

There were speculations that the Employees’ Provident Fund Organization (EPFO) may fail to pay 8.5% interest to its 60 million subscribers. The rumour on this was heard when the market collapsed. However, these reports are quashed as it was found that EPFO has enough reserves other than Exchange Traded Funds (ETF) units to meet the promised interest rate commitment.

The source has also confirmed that EPFO has sought for an extension on ETF stock liquidation in the background of market fall. It is said the EPFO will not make the market situation graver by selling ETF holdings. Further, EPFO was in a meeting with the Central Board of Trustees (CBT) on March 6 and stated that the organisation had enough funds in the form of government bonds and securities. This has facilitated the payment of interest at the rate of 8.5% to its subscribers. 

Also Read: EPFO lowers the interest rate on PF deposits to 8.5% for FY 2019-20

A report stated that EPFO had failed to redeem a major portion of its investment of Rs.95,500 crore, which was invested in ETFs before the World Health Organisation (WHO) labelled coronavirus as a pandemic. After the announcement on 11 March 2020, the stock market fell to reach the rock bottom every single passing day.

In 2015, EPFO stepped into investing in equities; the Labour Ministry capped the exposure of its corpus at 5-15% of its corpus. With a 5% investment in 2015, the exposure was raised to 15% by May 2017.

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in.

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