News Govt reduces EPF rate to 8.7%

Technoglitch

Technoglitch

Core Member
Setting aside retirement fund body EPFO trustees’ decision, the Finance Ministry lowered interest rate on PF deposits to 8.7 per cent for 2015-16, evoking strong protest from trade unions that dubbed the move as ‘anti-labour’.

As against the decision of the Labour Minister-headed Central Board of Trustees’ to provide 8.8 per cent rate of interest on PF deposits for 2015-16, the Finance Ministry has approved 8.7 per cent interest rate, which has implication for over 5 crore subscribers of the Employees’ Provident Fund Organisation (EPFO).

“The (EPFO’s apex decision-making body) CBT, at its meeting held in February 2016, had proposed an interim rate of interest at 8.8 per cent to be credited to the accounts of EPF subscribers for 2015-16. The Finance Ministry has, however, ratified an interest rate of 8.7 per cent,” Labour Minister Bandaru Dattatreya said in a written reply to the Lok Sabha today.

Govt reduces EPF rate to 8.7%, angry trade unions call it ‘anti-labour’ | The Indian Express
 
IndianMascot

IndianMascot

Core Member
Looks like finance ministry has failed to gather fund for country and the only way they are finding is to tax us more or to decrease the interest.
 
IndianMascot

IndianMascot

Core Member
Hmm. Another reason can be Congress has looted the country to extreme level and it will take time to have funds for the company.
 
Technoglitch

Technoglitch

Core Member
The explanation lies in the overall agenda of the Narendra Modi-government to align the savings rates in the country required to bring down the lending rates in the banking system, which is in turn, needed to boost a sagging economic growth. As a first step, the government moved to lowering the returns on small savings schemes in the economy when it lowered interest returns on post office savings and other small savings schemes having shorter tenure.

A one year post office deposit will now yield a return of 7.1 percent as against 8.4 percent before. Similarly, the rate on Kisan Vikas Patra has been revised downwards to 7.8 percent from 8.7 percent and that of Sukanya Samrudhhi account scheme has been lowered to 8.6 percent from 9.2 percent. Also, the Public Provident Fund rate has been dropped to 8.1 percent from 8.7 per cent. This gives room for banks to cut their deposit rates.

The reason is simple: A major reason banks have been hesitant to slash lending rates, so far, was the high deposit rates in the banking system. Without deposit rates coming down, banks cannot cut their lending rates since it will hit their margins. But, deposit rates couldn’t be lowered on account of the comparatively higher returns on small savings schemes and post office deposits. With small savings rate coming down now, the stage is set for a drop in bank lending rates as well.

EPF rate cut: Why Jaitley’s move to lower rate is the right economic decision, but a bad political move    - Firstpost
 
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