EPFO may retain 8.65% interest rate for FY18: Sources

The EPFO had announced 8.65% rate of interest on deposits for FY17, a tad lower than 8.8% in FY16.

New Delhi: Retirement fund body Employees Provident Fund Organisation (EPFO) is expected to keep interest rate unchanged at 8.65 percent on provident funds for its about 5 crore members for 2017-18 at its trustees' meet on February 21, 2018, sources said.

The EPFO has already sold exchange-traded funds (ETF) worth Rs 2,886 crore earlier this month to bridge the gap to maintain 8.65 percent for this financial year, they said.

The EPFO had announced 8.65 percent rate of interest on deposits for 2016-17, a tad lower than 8.8 percent in 2015-16.

It has earned a return of around 16 percent at Rs 1,054 crore which would be sufficient to provide 8.65 percent rate of interest this financial year, said sources.

The income projections for the current financial year have not been circulated along the agenda to the trustees and it would be tabled during the meeting, they said, adding the decision to sell the ETFs was taken after factoring in the income projections for the current financial year by the EPFO.

The EPFO has been investing in ETF since August 2015 and it has so far not monetised the ETF investments. The EPFO has invested around Rs 44,000 crore in the ETFs till date.

The agenda listed for the meeting of the trustees include the proposal for the rate of interest on the EPF deposits for the current financial year.

The trustees may also review the proposal to credit the ETFs into the members' EPF account because a large number of members do not have that level of financial literacy.

It is proposed that the members should be given the option to have ETF credits in their EPF account. 

(With PTI inputs)