EPF Interest Rate: EPFO May Keep Rate Unchanged At 8.25 Per Cent For FY26

The Employees’ Provident Fund Organisation (EPFO) would determine the interest rates in the upcoming Central Board of Trustees (CBT) meeting. The CBT, then, would send the rate recommendation to the Ministry of Finance for approval, which will evaluate the rates and may accept the recommendation as it is, or suggest changes before approval. For the last two years, the rates remained at 8.25 per cent. However, for this year, speculations are that it may remain intact or be reduced.

It is the CBT that is responsible for managing EPFO funds, their investment, and distribution. It recommends the Employee Provident Fund (EPF) interest rates, taking into account the returns on EPF investments, which are done in equity (up to 15 per cent at the maximum) and debt, as per the patterns notified by the Ministry of Labour and Employment. In addition to this, inflation is another factor that is considered while determining the rate.

The rates may remain the same at 8.25 per cent for the financial year 2025-26 (FY26), Moneycontrol reported, citing people aware of the matter. According to the report, it will be the third consecutive year when the rates will remain the same, and while EPFO may ask the CBT to reduce the rates, it may remain the same.

The EPFO, reportedly, has a total of around Rs 25-26 lakh crore at present, of which around 41 per cent is invested in the State Development Loans (SDL). Of the remaining corpus, around 16 per cent is in government securities, 15.9 per cent is in corporate bonds, and 9.5 per cent is in exchange-traded funds (ETFs).  

When the EPFO investment portfolio generated 7.62 per cent yields in FY24, the interest rates were fixed at 8.25 per cent. This year, in FY26, the indices have gained reasonably, and EPFO would have gained decent returns, which makes the case for not reducing the rates. Further, the EPFO aims to diversify the portfolio and invest more in equities to earn higher returns, per the report.

Beginning this month, the Economic Times also reported that EPFO may either reduce the interest rates by 0.05 per cent (5 basis points) to 0.20 per cent, or keep it unchanged, considering upcoming elections in 4-5 states, including West Bengal, Kerala, among others. In case of reduction, the rates may reduce from the current 8.25 per cent to 8-8.20 per cent.