The Employees' Provident Fund Organisation (EPFO) has proposed a reduction of interest rate from the current 8.5 percent to 8.1 percent, sources told CNBC-TV18 on Saturday. The proposal will have to be ratified by the Union Ministry of Finance before it comes into effect.

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Explaining the rationale behind the proposal, Union Minister of Labour and Employment Bhupender Yadav said the Centre wants to strike a balance between the safety of EPF corpus with high returns.

"If one has a 10-year fixed deposit with SBI, then one earns 5.45 percent. On similar instruments of ours -- be it PPF or others -- in all of those, 6.8 to 7.1 percent interest is distributed . Hence this year, our board (kept) in mind the global situation and equity markets; maintaining a balance of investment with social security. We can’t opt for very high-risk instruments; we are not market makers, but are in the market for stability and social security. That’s why for this year, our board has recommended that EPF rate be 8.1 percent. I am happy to say despite this recommendation, our surplus will be Rs 450 crore and we think we will be very close to our estimates," the minister said.

He added that the government is on the lookout for well-thought investment options and that the retirement fund body must balance security with returns.

First Published:Mar 12, 2022 12:22 PM IST