EPFO ie Employee Provident Fund Organization on Saturday recommended the interest rate on PF. It has recommended an interest rate of 8.1% for the financial year 2021-2022. This is the lowest interest rate on PF in the last 10 years. Last week, the Finance Ministry approved the proposal of 8.5 percent interest rate for the financial year 2020-21.
Now interest money will come in the account of people working in the private sector. Do you know how EPFO earns this interest, where it invests its funds, and how interest is credited to your account? Ain knows the answers to these questions.
When will the interest money come in the account?
The Central Board of Trustees (CBT) of EPFO recommends the interest rate on PF. Then, the Labor Ministry takes the approval of the Finance Ministry on this. Last week, the finance ministry approved an interest rate of 8.5 percent for 2020-21. Now EPFO will issue its notification. After this, in the next two to three weeks, this money will be transferred to the subscriber’s account.
What is CBT?
CBT is the most powerful decision-making body of EPFO. It is headed by the Union Labor Minister. The Labor Secretary of the Central Government is its Vice-Chairman. It consists of 5 representatives of the Central Government and 15 representatives of the State Governments. It also includes 10 representatives of employees and 10 representatives of employers.
Where does EPFO invest its funds?
The EPFO invests 85 percent of its money in debt (like bonds) and the remaining 15 percent in stocks. Under debt, it is allowed to invest at least 45 percent and a maximum 65 percent in government securities and related instruments.
He can invest a minimum of 20 percent and a maximum of 45 percent in debt securities of companies. He can also invest in the securities of banks and government financial institutions. Provided that the remaining maturity period of such instrument should be at least 3 years. Fund managers can put up to 5 percent of their funds in short-term debt. Under this come instruments like commercial paper.
As far as investment in stocks is concerned, EPF is also allowed to invest in mutual funds and SEBI regulated exchange-traded funds.