Govt hikes EPFO interest rate ahead of election

EPFO interest rate for the fiscal year 2018-2019 is hiked by 10 basis points to 8.65 per cent making them more attractive than saving bank's deposits.

The Employees’ Provident Fund Organisation (EPFO) revises EPF interest rate annually. The rate is decided by the Central Board of Trustees (CBT), which on Thursday raised the interest rate to 8.65 per cent for the FY18-19 as against 8.55 per cent in FY17-18.

As EPF is tax-free, they tend to offer more return than other traditional interest incomes like bank deposits. However, because of treatment of EPF as pension fund, it has a longer lock-in periods, thus the employees money is blocked and the interest earned is subject rates which are revised upwards and well as downwards annually. Also, experts believe that the recent repo rate cut by Reserve Bank of India suggests economic headwinds and thus the interest rates hike by EPFO is unsustainable in the longer run.

But this being a election year, the move can be seen as an appeasement measure by the NDA government targeting more than 6 crore members of EPFO.