In­ter­est rate on PPF may be slashed to 8.50% for this year

Financial Chronicle - - FRONT PAGE - FC BUREAU

MIL­LIONS of EPFO sub­scribers may have to take a hit on their earn­ings from prov­i­dent fund de­posits as the fund man­ager has de­cided to seek a cut in in­ter­est rate to 8.5 per cent.

The Cen­tral Board of Trus­tees (CBT) of the Em­ploy­ees Prov­i­dent Fund Or­gan­i­sa­tion (EPFO) will meet on Novem­ber 23 to con­sider a re­duc­tion in in­ter­est rate for fis­cal 2017-18. The EPFO paid 8.65 per cent in­ter­est last year.

The de­ci­sion to cut the rate has come at a time when re­turns of other de­posit schemes are also low. A steady rise in food in­fla­tion is erod­ing their sav­ings as well.

A se­nior gov­ern­ment of­fi­cial said prov­i­dent fund sub­scribers may have to set­tle for a lower rate of in­ter­est on their re­tire­ment cor­pus this fi­nan­cial year, but the over­all re­turn would be the same or more com­pared to last year’s. This would be pos­si­ble due to EPFO’s move to utilise its in­vest­ment in eq­ui­ties.

In its next meet­ing, the is­sue of uni­ti­sa­tion of EPFO’s in­vest­ments in eq­ui­ties will also be on the agenda. The re­tire­ment body would be in­vest­ing 15 per cent of its cor­pus in eq­ui­ties through ex­change-traded funds (ETFs) this year. It has been pro­posed that each sub­scriber’s share of ETF in­vest­ments would be cred­ited in his PF ac­count in mu­tual fund-like units.

Sub­scribers can re­deem the units when he with­draws the PF. The to­tal re­turns will in­clude the gains on these units de­pend­ing on the mar­ket price of the ETF and the in­ter­est on the part of the fund in­vested in debt. Most of the de­posits in the PF ac­counts are in­vested in gov­ern­ment se­cu­ri­ties. As in­ter­est rates in bank de­posits have been fall­ing in the last few quar­ters, the EPFO has been com­pelled to lower in­ter­est rate.

Mean­while, PF sub­scribers can now down­load the Umang App and opt for claims elec­tron­i­cally. They can also re­view pass­books, claim pen­sion with­drawals and opt for fi­nal set­tle­ments.

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