EPF, PPF interest rate gap widens to 105 basis points

Budget, SEM Sector, GST, Business, NewsMobile, Mobile News, India

Wednesday’s cut in Public Provident Fund’s (PPF) interest rate to 7.6 percent increases the gap between this and the Employees’ Provident Fund (EPF) rate to a huge 105 basis points (bps).

Even if the EPF rate for FY2017-18 is marginally cut from the current 8.65 percent to, say, 8.4 percent, the difference would remain substantial thereby disadvantaging the self-employed class in terms of retirement savings.

Even while the yield on government securities (G-secs) has been rising over the last 1-2 months, the government has cut interest rates for the January-March quarter of 2018 on almost all small savings products except for the Senior Citizen Savings’ Scheme.

The interest rate on PPF was 7.8 percent in the previous quarter. The government resets the interest rate on small savings every quarter. Interestingly, EPF another retirement focussed savings instrument currently offers a higher rate of 8.65 percent (2016-17), a difference of 105 basis points.

EPF is an instrument that is available only to a salaried individual, while PPF can be used by all including salaried, professionals, home-makers, self-employed, and even those who are not part of the workforce. The humble PPF has also been a favourite among several parents who open accounts in the name of their minor children so as to accumulate savings for their long-term needs.

LEAVE A REPLY

Please enter your comment!
Please enter your name here