The salaried class, government employees in particular, were left complaining as the Employees Provident Fund Organisation (EPFO), the retirement fund body, lowered the interest rate on provident fund deposits for the current Financial Year to 8.55% from the existing 8.65%.
Gangwar, who also heads the EPFO's apex decision-making body, the Central Board of Trustees, said he expected the finance ministry to approve the interest rate that was decided on Wednesday.
The past few years have seen the interest rate on Employees' Provident Fund (EPF) headed downwards - from 8.8 per cent in 2015-16 to 8.65 per cent in the following fiscal, a four-year low.
After the EPFO decides the interest rate, it has to be ratified by the Finance Ministry. "This year, we have chose to recommend 8.55% for 2017-18, which will leave a surplus of Rs 586 crore", he said.
EPFO, India's retirement fund manager, cited lower returns from its investment in debt instruments as the reason for the rate cut.
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"It is hard to evaluate the future in view of the present economic scenario". This is not the first time that the CBT had taken this decision but implementation remained a pipedream because the required amendment in the Employees Provident Fund & Miscellaneous Provisions Act did not come through. "We paid 8.65% last fiscal, which had resulted in a surplus of Rs 695 crore past year", Gangwar said.
The EPFO has invested around Rs 38,000 crore so far in the ETFs. Last year, the government had trimmed the rates on small savings schemes such as National Savings Certificate and PPF by 20 basis points but spared senior citizens.
Surjewala said the government has also levied multiple bank charges, including for withdrawal of cash from ATMs for more than three times.
Reacting over the development, the Congress has accused the Narendra Modi government of "back stabbing" honest tax payers by lowering the interest rate on EPF.
The rates have been coming down since 2013-14when the government made a decision to align PF interest rates with small saving schemes such as PPF.