Earlier in September 2020, citing exceptional circumstances arising out of Covid-19, the central board of trustees (CBT) had recommended the EPFO to split payment of the interest rate of 8.5 percent into two parts(8.15 percent & 0.35 percent).
The EPFO took the decision in a smart way, luckily after receiving higher than expected returns on equity investments in December 2020 which would leave the EPFO with double the surplus projected three months back in September 2020.
Due to the sharp rise in the stock markets in October, November, and December 2020, EPFO has been able to liquidate its equity investments at profit.
The EPFO invests 85 percent in fixed-income instruments and 15 percent in equity through ETFs from the contributions received.
EPFO had given 8.65 percent interest in FY2018-19. It has been noted that the EPF interest rate is at a seven-year low at 8.5 percent for FY2019-20. But the fall in EPF interest for FY2019-20 seems to be much lower than the overall fall in the market interest rate on similar products because of the Covid-19 pandemic.