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Millions of salaried employees will not be required to wait till the end of 2022 to get their FY22 PF interest credited to their account as the employees' provident fund organisation (EPFO) is expected to complete the process well in advance.
This is largely due to two factors. First, the 8.1% interest rate for FY22 is the lowest in 43 years, and hence unlikely to face scrutiny from the finance ministry. Secondly, crediting interest rate of 8.1% earlier will benefit EPFO's financial health as the outgo will be less during PF claim settlements, at least two government officials said requesting anonymity.
EPFO under the labour ministry may disburse the interest rate ahead of Dusshera-Diwali festive season, one of the two officials cited above said.
"I don't think the finance ministry will have much of a problem in giving formal approval to 8.1% interest rate. Expect the credit of interest pay-out happening earlier this year," said one of the officials.
"In a government system, nothing is final till a formal announcement happens and the finance ministry needs to approve the central board recommendations on interest rate first. But it would be fair to believe that credit of FY22 interest is likely to happen earlier than the last couple of years. May be two-three months earlier. Expect this ahead of Dussehra-Diwali festive season," a second official said.
The FY21 EPF interest rate was credited in December 2021.
The second official said till the time 2021-22 interest rate is credited following a formal approval from the finance ministry, all EPF settlements, lakhs of them, will be settled in the previous year's interest rate.
It means if you, as an EPF member, are withdrawing your PF corpus for any reason including loss of employment, the settlement will happen at an 8.5% interest rate and not at 8.1%. This process is part of the law, and this will be a good differentiator in terms of payout, the second official argued.
Ahead of the Dussehra-Diwali festive season, it will create a feel-good environment as that is also the time when lakhs of non-gazetted government employees including those from Indian railways get a bonus. Besides, a hike in dearness allowance (DA) and dearness relief for government employees and pensioners also generally gets effected during the same time to compensate for price rise.
FY22 EPF rate
The central board of EPFO on March 12 recommended paying an 8.1 percent rate of interest on provident fund deposits for the FY22 financial year, down from 8.5 percent in FY21.
This was the lowest rate in 43 years, and the last time EPFO paid lower than this rate was in 1977-78 when the interest rate was 8%. The union government has said that the EPF rate in FY22 reflects market realities.
The EPFO paid an 8.5 percent interest rate to millions of its subscribers in 2019-20; 8.65 percent in 2018-19 and 8.55 percent in 2017-18.
The EPFO invests 85 percent of its annual accruals in debt instruments including government securities and bonds, and 15 percent in equity through ETFs. The earnings from both debt and equity are used to calculate the interest payment.
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