The Indian Express had reported Wednesday that the Finance Ministry had granted clearance for the interest rate recommendation of 8.5 per cent.
The Employees’ Provident Fund Organisation (EPFO) has begun crediting 8.5 per cent interest rate for 2019-20 for its over six crore contributing subscribers, Labour and Employment Minister Santosh Kumar Gangwar said Thursday.
The Labour Ministry also released guidelines for the recently approved Atmanirbhar Bharat Rozgar Yojana, under which the government proposes to provide subsidy for provident fund contribution of employers and employees for workers who lost jobs between March 1 and September 30, and for new workers employed onor after October 1.
“When we had announced 8.5 per cent interest rate, everyone was surprised that how is it going to be possible. Out of this, 8.15 per cent has been the debt component and 0.35 per cent is from capital gains of the equity component. A lot of discussion took place, constant discussions were held with the Finance Ministry on proposal… the EPF surplus is growing and crediting will begin from today,” Gangwar said.
The Indian Express had reported Wednesday that the Finance Ministry had granted clearance for the interest rate recommendation of 8.5 per cent. The retirement fund body will be crediting the interest rate of 8.5 per cent in one go instead of the split 8.15 per cent and 0.35 per cent proposed earlier.
In March this year, the EPFO’s Central Board of Trustees, headed by Gangwar, had recommended 8.5 per cent interest rate for EPF subscribers for 2019-20.
In September, the CBT recommended splitting payment of the interest rate of 8.5 per cent for financial year 2019-20 into two parts, citing “exceptional circumstances arising out of Covid-19”.
The EPFO had said it would credit 8.15 per cent to its over six crore subscribers for the year immediately and give the remaining 0.35 per cent, linked to its equity investments, “before December 31”. This, it had said, was subject to redemption of its units invested in exchange-traded funds or ETFs. The EPFO is learnt to have gained about Rs 3,000 crore from the sale of ETF units.
The Finance Ministry has been nudging the EPFO to reduce the rate to sub-8 per cent level in line with the overall interest rate scenario. Small savings rates range from 4.0-7.6 per cent, which have been kept unchanged for the January-March quarter. It had questioned the 2018-2019 interest rate of 8.65 per cent as well, besides the EPFO’s exposure to IL&FS and similar risky entities.
Under the guidelines for Aatmanirbhar Bharat Rozgar Yojana released Thursday, the central government said it will provide a subsidy of up to 24 per cent of wages for two years for employees in establishments employing up to 1,000 employees in the wage month of September.
These establishments will, however, continue to get subsidy of employer’s share even if the number of contributing EPF members exceeds 1,000 during the scheme period, the Ministry said. For establishments employing more than 1,000 employees in September, the central government will provide for employees’ share of contribution subject to the upper limit of 12 per cent of wages.
The government will pay the PF contribution for workers with wages up to Rs 15,000. Since the central government is paying the employee’s share for EPF contribution for new employees, the employer is not supposed to make any deduction towards employees’ share from the monthly wage, it said.
The new scheme is similar to the earlier scheme of Pradhan Mantri Rozgar Protsahan Yojana (PMRPY) which was implemented up to March 2019 to incentivise new employment. PMRPY was announced in August 2016, with the government providing thevfull employers’ contribution of 12% (EPF and Employees’ Pension Scheme), for a period of three years for new employees registered with the EPFO on or after April 1, 2016, and earning up to Rs 15,000 per month. A total Rs 8,300 crore has been given to 1,52,899 establishments, covering 1,21,69,960 beneficiaries under PMRPY.
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