Millions of salaried employees will earn less on their statutory monthly provident fund deductions in 2019-20, as the Employees Provident Fund Organisation (EPFO) on Thursday decided to slash the interest rates on provident fund savings of formal sector workers to a seven-year low of 8.5% for the year 2019-20. The EPFO had given an interest rate of 8.65% in the previous financial year to roughly 170 million subscribers. The new rate is 15 basis points below the figure for the previous financial year, impacting earnings of its over 60 million active subscribers. The decision was mainly because of two reasons: EPFO getting a lower rate of return on its investments in government securities and the body’s view to keep a higher surplus owing to economic uncertainties. The decision was taken at the EPFO’s central board of trustees (CBT) meeting chaired by Labour and Employment Minister Santosh Kumar Gangwar. The interest rate will be notified by the labour ministry after getting approval from the finance ministry. The interest rate on EPF savings will be the lowest since 2011-12 when it stood at 8.25 percent. In 2012-13, the EPFO had given a rate of return of 8.5 percent. Labour and Employment Minister Santosh Kumar Gangwar said the proposed 8.5% rate will leave a surplus of Rs 700 crore with the retirement fund body. The EPFO could have offered a higher interest rate of 8.55 percent, keeping a surplus of around Rs 300 crore, but decided not to do so. The recommendation of the CBT regarding the EPF interest rate now requires ratification from the Finance Ministry which had last year questioned the surplus level and the Fund’s exposure to IL&FS and similar risky entities before granting its nod for the 8.65% rate. As per calculation, retaining interest rate at 8.65% would have left a deficit of around Rs 350 crore, while 8.45% would have resulted in a surplus of Rs 1,000 crore. Both the finance committee and the Central Board of Trustees (CBT) met to decide the interest rate based on EPFO’s income projections for the current financial year. The new rate of interest is higher than the return on investment in small saving schemes and that of provident fund schemes for government employees.