Today’s Realities Dictated Lower Interest Rates on Employee PF, Says FM in RS

Finance Minister Nirmala Sitharaman on Monday defended a proposal to cut the interest rate paid on deposits from employees’ provident funds to more than four decades from 8.1%, saying the rate is dictated by the realities of today when the interest rate on other small savings instruments was even lower. .

Responding to a debate in the Rajya Sabha over additional expenditure for the current financial year, she said the decision to lower the interest rate was taken by the central board of the managing body of the provident fund, EPFO, which has representatives of all stakeholders, including employee unions. .

His ministry is the nodal authority to approve the recommendation of the Central Board of Trustees of the Employees Provident Fund Organization (EPFO).

“EPFO has a central board which is the one taking the call on the rate to give…and they haven’t changed it for some time. They’ve changed it now…to 8.1%” , said the said the Minister of Finance.

The Minister further stated that this was a decision taken by EPFO’s Central Board, which has a wide range of representatives on its board.

The rate was 8.5% for 2020-2021. Earlier this month, the EPFO ​​decided to lower the interest rate to its lowest level in four decades of 8.1% for 2021-2022.

Sitharaman cited the prevailing comparative interest rates of other schemes, saying that Sukanya Samriddhi Yojana offers 7.6%, a savings scheme for the elderly (7.4%) and a PPF (7.1% ), while SBI’s 5-10 year fixed deposits attract interest rates of 5.50%. .

“With all this, EPFO ​​took a call to give 8.1% (interest rate),” she said.

She added that for 40 years, EPFO ​​fees have not gone down.

“Yes, 40 years. There are realities of today that keep us within the framework of the decisions made by the EPFO ​​Central Council. It remains to come to the Ministry of Finance for approval, but there is no Still, those are the prevailing rates today and it (EPFO) is still higher than the rest of them,” she said.

Later, the House returned a Finance Bill proposed by Finance Minister Nirmala Sitharaman, authorizing the government to pay out and appropriate certain sums from the Consolidated Fund for the fiscal year 2021-22.

The Upper House of Parliament also returned another finance bill for expenditures made in the 2018-19 financial year.

The two Appropriation Bills were passed by the Lok Sabha earlier.

Sitharaman referred to LIC’s pre-IPO valuation and said the insurance giant’s intrinsic value was calculated in an “extremely scientific way” and disclosed in draft IPO documents filed with SEBI.

Eligible LIC policyholders will have a 10% reservation and may receive a discount on the offer price, she said.

Regarding the approval of the requested excess expenditure, she said that the government had borne the higher cost of urea and had not passed it on to the farmers.

She mentioned that the decentralization of the state’s share of central taxes is projected at Rs 8.17 lakh crore for FY23, and the revised estimate of Rs 7.45 lakh crore for FY22 has already been published.

She further said that Rs. 5,000 crore is being offered for recapitalization of public insurance companies in the third batch of supplementary grant applications.

(Only the title and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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