Provident fund deposits interest rate: EPFO to give a good news today?

Provident fund deposits interest rate: EPFO to give a good news today?

It seems a good news in terms of financial benefit is not very far! Retirement fund body EPFO is likely to retain 8.65 per cent interest rate for 2017-18 on provident fund deposits. If this happens at EPFO trustees’ meet on Wednesday, it will be big news for about 5 crore members. Why this seems so likely as in order to maintain the 8.65 per cent interest this fiscal, the Employees Provident Fund Organisation (EPFO) had sold a portion of its investments in the exchange traded funds (ETF) worth Rs 2,886 crore earlier this month. Moreover, the EPFO had announced this rate on deposits for 2016-17, a tad lower than 8.8 per cent in 2015- 16. It has earned a return of Rs 1,054 crore on sale of ETFs this month, which would be sufficient to provide 8.65 per cent rate of interest this fiscal.

Here are top things to know about this development and why it is all set to turn into a reality:-

-The EPFO has been investing in ETFs 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.

– As per the latest evaluation of the EPFO’s investments in ETFs, it has earned a return of 16 per cent. However, this return is notional because it could not be realised unless the EPFO liquidates these ETF investments.

– Also, 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.

What’s been proposed? Key things

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

– The income projections for the current fiscal were circulated along the agenda to the trustees and would be tabled during the meeting on Wednesday.

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