EPFO Keeps PF Interest at 8.25% for Third Straight Year Amid Market Uncertainty

The Central Board of Trustees (CBT) of the Employees’ Provident Fund Organisation (EPFO), chaired by Labour and Employment Minister Mansukh Mandaviya, has recommended maintaining the interest rate on provident fund deposits at 8.25% for 2025-26.

This marks the third consecutive year that the retirement fund body has proposed the same rate for its more than 7.8 crore contributing subscribers.

The recommendation now awaits ratification from the Ministry of Finance before interest is credited to subscribers’ accounts.

Investment Panel and Finance Ministry Had Suggested 8.10%

Divergence from Internal Financial Advice

The decision to retain the 8.25% rate comes despite EPFO’s own investment sub-committee and the Ministry of Finance advising a reduction to 8.10% for 2025-26.

According to discussions during the CBT meeting, maintaining the higher rate could lead to a projected loss of Rs 944.06 crore.

In contrast, adopting the suggested 8.10% rate would have generated a surplus of Rs 1,675.82 crore.

For context, in 2024-25, the surplus stood at Rs 5,480.34 crore based on actual income and expenditure details shared during the meeting.

Trade Union Pressure Influenced Decision

SP Tiwari, Member, CBT and National General Secretary, Trade Union Co-ordination Centre, said:

“On the basis of this year’s contribution and surplus amount, it was proposed that the interest rate for 2025-26 be reduced to 8.10%, and the same was proposed by the investment sub-committees and concurred by the Finance Ministry. However, under sustained pressure and strong representation by the trade unions, the Chairman consented to continuing with the interest rate at 8.25% despite a projected deficit of Rs 944 crore, which can be adjusted from the previous year’s surplus,”

This indicates that social and political considerations played a role alongside financial calculations.

Market Volatility and Geopolitical Concerns

Calculations Based on 11-Month Income Estimates

Board members clarified that the interest rate determination is based on income projections for 11 months and remains subject to revision by the end of the financial year.

The projected deficit also reflects recent volatility in stock markets.

Despite these uncertainties, Vineet Nahata, CBT member and employers’ representative from PHD Chamber of Commerce and Industry, stated:

“Interest rate was kept steady at 8.25% despite uncertainties in financial markets and tense geopolitical situation and Israel-US vs Iran war…next year we expect creation of Interest Stabilization Reserve to formalise the consistency and predictability of stable interest payout to subscribers,”

The proposed Interest Stabilization Reserve could help buffer future fluctuations and maintain predictable returns.

Political Context and Recent Interest Rate Trends

The decision comes in a politically significant year, with elections scheduled in four states and one Union Territory.

Notably:

• The previous increase to 8.25% for 2023-24 was announced ahead of the 2024 Lok Sabha elections.

• The rate had earlier been 8.15% in 2022-23.

• The lowest rate in recent history was 8.10% in 2021-22.

• The highest rate over the past decade was 9.50% in 2010-11.

The consistency at 8.25% suggests a preference for stability amid both economic and political uncertainty.

EPFO Investment Performance

The EPFO’s returns are primarily linked to:

• Yields on government securities

• Returns from equity investments

• Exchange Traded Funds (ETFs)

The Ministry of Labour and Employment stated:

“The decision reflects the strong credit profile of EPFO’s investment portfolio and its sustained ability to deliver competitive returns to its members,”

The Ministry also noted that returns from ETF and other investments have helped sustain rates above 8% for several years.

Pilot Project to Settle Inoperative Accounts

Rs 2,800 Crore to Be Released

In a significant relief measure, the EPFO Board approved a project aimed at settling nearly Rs 2,800 crore in unclaimed provident fund accounts.

An account is classified as inoperative if:

• No contribution is received for three consecutive years

• The member has attained 55 years of age

• Or from the date of retirement, whichever is later

Auto-Initiation for Small Balances

The Board approved a pilot project to automatically initiate claim settlements for inoperative accounts with unclaimed balances of Rs 1,000 or less.

• Around 1.33 lakh such accounts

• Totaling nearly Rs 5.68 crore

• Will be covered in the first phase

Funds will be directly credited to Aadhaar-seeded and EPFO-linked bank accounts without requiring fresh claims or documentation.

The project will later expand to accounts with balances exceeding Rs 1,000.

New PF, Pension and Insurance Schemes

The Board also approved notification of revised social security schemes under the Code on Social Security, 2020.

These updates aim to align:

• EPF (Employees’ Provident Fund)

• EPS (Employees’ Pension Scheme)

• EDLI (Employees’ Deposit Linked Insurance)

with the provisions of the Social Security Code.

However, CBT members called for broader consultation.

R Karumalaiyan, employees’ representative in CBT and member of Centre of Indian Trade Unions, said:

“The schemes need to be discussed with central trade unions and a larger tripartite consultation is required,”

Further stakeholder discussions are expected before full implementation.

EPFO Interest Rate History (2010–2026)

H3: Key Highlights

• Highest Rate: 9.50% (2010-11)

• Lowest Rate: 8.10% (2021-22)

• Current Rate (2024-25): 8.25%

• Proposed for 2025-26: 8.25% (Pending ratification)

Over the past decade and a half, EPFO interest rates have fluctuated in response to bond yields, equity returns, and broader economic conditions.

Conclusion

The EPFO’s recommendation to maintain the 8.25% interest rate for 2025-26 reflects a balancing act between financial prudence and subscriber expectations.

While internal financial advisers and the Finance Ministry supported a reduction to 8.10%, the Board opted for continuity, even at the cost of a projected Rs 944.06 crore deficit — which will be adjusted against the previous year’s surplus.

The move underscores EPFO’s intent to provide stability amid market volatility, geopolitical tensions, and a politically sensitive year.

With additional reforms such as settlement of inoperative accounts and new social security schemes under the Code on Social Security, 2020, the organisation appears focused on both short-term subscriber relief and long-term structural alignment.

Final approval from the Ministry of Finance will determine when the 8.25% interest is officially credited to the accounts of over 7.8 crore EPF subscribers.