EPFO Interest Rate Better Than Other Schemes, Reflects Today's Realities, Says Nirmala Sitharaman

According to the finance minister, the EPFO's central board takes a call on interest rate on provident fund deposits, and it is the board that has proposed cutting PF rate to 8.1 per cent for FY21-22

Finance Minister Nirmala Sitharaman said that for 10 years during the UPA regime, nil defence procurement happened and from pin to aircraft had to be ordered. Image: Getty

New Delhi: Finance Minister Nirmala Sitharaman on Monday in her reply to a discussion on Appropriation Bills in the Rajya Sabha said that the proposed 8.1 per cent interest rate on employees' provident fund (EPF) is better than interest rates offered by other small savings schemes, and the revision is dictated by the realities of the current times.

According to the finance minister, the EPFO's central board takes a call on interest rate on provident fund deposits, and it is the board that has proposed cutting PF rate to 8.1 per cent for FY21-22.

In her reply she said, “EPFO has a central board which is the one which takes the call on what rate has to be given for them, and they have not changed it for quite some time. They have changed it now, to 8.1 per cent."

The minister in her speech mentioned that it is a decision taken by the EPFO central board which has a wide spectrum of representatives in it. The EPFO has taken a call to keep the rate at 8.1 per cent, whereas rates offered by other schemes, including Sukanya Samriddhi Yojana (7.6 per cent), senior citizen saving scheme (7.4 per cent), and PPF (7.1 per cent) are much lower.

“The fact remains these are rates which are prevailing today, and it (EPFO interest rate) is still higher than the rest,'' the finance minister said adding that EPFO's rates had remained unchanged for 40 years and the revision now reflected “today’s realities”.

The EPFO has proposed cutting down the interest rate on provident fund deposits from 8.5 per cent in 2020-21 to 8.1 per cent for 2021-22.

Sitharaman also said that for 10 years during the UPA regime, nil defence procurement happened and from pin to aircraft had to be ordered.

Regarding LIC IPO valuation, she said that the embedded value of the state-run insurer was calculated in an “extremely scientific way” and has been disclosed in draft IPO papers filed with the Sebi.

On excess spending approval being sought, she said that the Centre has borne higher cost of urea, and not passed it on to farmers. She said that the devolution of state share in central taxes is projected at Rs 8.17 lakh crore in FY22-23, and the revised estimate of Rs 7.45 lakh crore for FY21-22 has already been already released.

The finance minister also said that Rs 5,000 crore is proposed for recapitalisation of state insurance companies in the third batch of supplementary demands for grants.