EFFO Proposes hike in interest rate to 8
22, Feb 2019
Prelims level : Economy Mains level : Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.
- Provident Fund deposits will now earn more, with the Employees’ Provident Fund Organisation (EPFO) recommending a hike in interest rates to 8.65% for 2018-19.
- At its 224th meeting chaired by Labour Minister Santosh Gangwar, the EPFO’s Central Board of Trustees decided to recommend a rate hike of 10 basis points
- The recommendation will go to the Finance Ministry for the final approval. The increased payout is expected to leave EPFO with a surplus of Rs. 151 crores for the year, in comparison to a surplus of Rs. 586 crore the previous year.
- The 8.65% rate is higher than what is available on government small savings schemes. This hike returns the rate of interest to the same level as it was in 2016-17, after a decline to a five-year low of 8.55% in 2017-18.
- In another decision that is likely to benefit workers, the Employees State Insurance Corporation’s Central Board reduced contribution rates from 6.5% to 5% of monthly wages at its meeting. Employees will only have to pay 1%, while the employer’s share is reduced to 4%.
- ESIC also decided to fully reimburse state governments for its medical scheme, removing the cap of Rs. 3,000 per person. The monthly income ceiling limit for dependent parents to avail benefits under the scheme was also raised from Rs. 5,000 to Rs. 9000.