the employees provident fund organisation epfo has declared an interest rate of 855 for 201718 a 10 bps cut from the 865 it paid out to its subscribers in 201617 this is the second consecutive cut in interest rate which was 88 in 201516 the move will affect around six crore subscribers and leave epfo with a surplus of rs 586 crore against rs 695 crore in the previous financial yearthe interest rate decided by the central board of trustees will have to be vetted by the finance ministry following which it would be notifiedepfo had earlier this year sold rs 3700crore equity shares in the market earning a profit of rs 1100 crore as a result of which it was felt that the retirement fund body could retain the interest rate for the current financial year at 865 however the labour minister said this money has been used to purchase securities at higher rates the epfo which manages a corpus of over rs 10 lakh crore has been investing in etfs since august 2015 it has invested around rs 44000 crore in etfs till datelabour minister santosh kumar gangwar who heads the bodys central board said that the interest rate payout was cut because of low returns from debt investmentstill 201415 the epfo invested only in fixedincome instruments the annual interest that is paid out is based on the interest earned from the fixed income investments the gains from the equity investments are yet to be passed on to subscribers as the methodology is still to be worked out the debt component this year has generated a return of only 8 and hence the epfo liquidated some of the etfs so that the total interest rate could be 855the proposed methodology for passing on gains from equity investments is likely to be implemented soon as the process has been approved by the cbt the process will involve the following stepsthe epfo will announce the nav of the composite etfs every monthfor past investments units will be credited to epfo accounts of holders who are active as on the cutoff date and have made contribution in the prior period if a subscriber has withdrawn or closed an account before the cutoff date he or she will not be given any unitsunits will be credited every monththe epfo account statement will reflect both the debt and equity componentswhen an epfo account is closed the units will be redeemed based on the nav of the previous month in case the withdrawal needs are immediate meanwhile central trade unions which had strongly opposed the move to lower the interest rate are unlikely to agitate over the issue unlike in the past