Lok Sabha Question No. 196 (UNSTARRED), answered on 2022-07-18
Subject: Rate of Interest on EPF
Ministry: LABOUR AND EMPLOYMENT
Asked by: Vijayakumar (alias) Vijay Vasanth, Ravneet Singh

## MINISTRY OF LABOUR AND EMPLOYMENT

## GOVERNMENT OF INDIA LOK SABHA

## UNSTARRED QUESTION NO. 196 TO BE ANSWERED ON 18.07.2022

## RATE OF INTEREST ON EPF

196. SHRI VIJAYAKUMAR (ALIAS) VIJAY VASANTH: SHRI RAVNEET SINGH BITTU:

Will  the  Minister  of  LABOUR  AND  EMPLOYMENT  be  pleased  to state:

- (a)whether it is a fact that the Government has approved 8.1 percent rate  of  interest  on  Employees'  Provident  Fund  (EPF)  for  2021-22 which is lowest in the last four decades;
- (b)if so, the details thereof along with the reasons therefor;
- (c)whether it is a fact that the Employees' Provident Fund Organization (EPFO)  is  facing  issues  relating  to  huge  withdrawals,  declining interest rate and underperformance of its equity portfolio and if so, the details thereof along with the reasons therefor;
- (d)whether EPFO is considering increasing the equity investment limit to 25% to bridge shortfall and if so, the details thereof; and
- (e)the  details  of  the  steps  being  taken  by  EPFO  to  improve  its performance  and  protect  the  interests  of  the  investors  in  this regard?

## ANSWER

## MINISTER OF STATE FOR LABOUR AND EMPLOYMENT (SHRI RAMESWAR TELI)

- (a) & (b): As per the provisions of Paragraph 60(1) of the Employees' Provident  Fund  (EPF)  Scheme,  1952,  Employees'  Provident  Fund Organisation  (EPFO)  shall  credit  to  the  account  of  each  member interest at such rate as may be determined by the Central Government in consultation with the Central Board of Trustees (CBT), Employees' Provident Fund (EPF).  The rate of interest on EPF is dependent on the income received by the EPF from its  investments  and  such  incomes

are  distributed  only  in  accordance  with  the  EPF  Scheme,  1952.  The CBT, EPF had recommended 8.10 per cent rate of interest on EPF for the financial year 2021-22, which has been approved by the Government and is higher than other comparable schemes viz. General Provident Fund (7.10%)/Senior Citizens Savings Scheme (7.40%)/Sukanya Samriddhi Account Scheme (7.60%).

## (c): The details of the trend of EPF withdrawals during the last 3 financial years are as under:

|   Sl. No. | Financial Year   | Withdrawals (Rs. in crore)   | No. of Claims settled   |
|-----------|------------------|------------------------------|-------------------------|
|         1 | 2019-20          | 70,202.34                    | 1,28,77,354             |
|         2 | 2020-21          | 91,187.54                    | 2,33,90,550             |
|         3 | 2021-22          | 1,04,959.18                  | 2,88,15,498             |

The  details  of  10-year  Government  Securities  Rates  and Return  on  EPFO's  Investments  in  Equity  for  the  last  3  years  are  as under:

|   Sl. No. | FY (as on 31 st March) 10-Year G- Sec. Rates Notional Return EPFO Equity   |
|-----------|----------------------------------------------------------------------------|
|         1 | 2019-20 6.77 -8.29 (Covid Impact)                                          |
|         2 | 2020-21 6.42 14.67                                                         |
|         3 | 2021-22 6.96 16.27                                                         |

- (d): The Finance Investment and Audit Committee (FIAC), a SubCommittee  of  CBT,  EPF,  has  recommended  for  the  proposal  to increase investment in equity and related investments in category IV of the Pattern of Investment from 5-15% to 5-20% for consideration of CBT, EPF.
- (e): The details of the steps being taken by EPFO to improve its performance and protect the interests of the investors are as under:

Contd..3/-

i. All investments are done as per the Pattern of Investment notified by the Government; ii. Investment Guidelines are approved by tripartite governing body of EPFO.  It  prescribes  processes  and  procedures  which  are  followed without any deviation; iii.    The  CBT  and  its  Sub-Committee  monitor  all  investment  aspects, and regularly examine and deliberate, upon various instruments which are available for investment; iv.  The Investments are carried out through expert Portfolio Managers appointed by CBT for such purposes; and v.  The asset classes are identified and approved on the basis of risk return  matrix  and  thus  investments  are  undertaken  after  adequate safeguards in such guidelines.

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