Help savers: Let interest rates turn more flexible

For over 60 million subscribers of the Employees’ Provident Fund Organisation (EPFO), the finance ministry’s nod this week to the body’s proposed interest payout at an 8.15% rate for 2022-23 must have come as a relief.

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The rate was raised from 8.1% the previous year. Though market rates have risen far more since India’s rate upcycle began last May, subscribers of this state-run savings scheme can draw comfort from the relatively high rates they got when other rates sank along with the central bank’s policy settings. What the fund pays typically stays within a narrow rate band, as its rate depends on the surplus it makes. In this instance, a payout any higher could have pushed it into a deficit instead of the nearly ₹664 crore surplus it expects after holder accounts are credited. Since the bulk of its corpus is invested in debt, especially securities issued by the government, the scope for larger returns is limited. The EPFO was allowed a thin slice of equity investments to boost returns by taking on a bit more risk, but its share portfolio has been kept under the official limit. Given that the fund holds the lifelong savings of our salaried class, safety must dictate its holdings. Yet, a slight risk-