The highest interest rate that the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF) have ever offered was 12%. PPF hit that peak between 1 April 1986 and 14 January 2000, while EPF offered that rate from FY1990 to FY2001.
The PPF came into existence in 1968. In the initial two years, the scheme offered just 4.8%. From there, the interest rates gradually rose until they peaked at 12%. From FY01, the rates started sliding. The 7.1% rate that the PPF offers now is the lowest in about 44 years.
The government introduced the EPF scheme in 1952. In the initial three years, it offered a 3% interest rate.
Historically, the interest rates on both schemes were always close to each other. Things changed when the government decided on a quarterly review of interest rates on small savings schemes, which includes the PPF.
The interest rate on PPF fell to 8% in 2016, 7.8% in 2017 and 7.6% in 2018. It rose again in 2019, followed by a steep cut of 80 basis points in April 2020.
EPF interest rates, on the other hand, remained above 8.5% all through these years. For FY21, the EPF may offer 8.5%, according to reports.
The finance ministry decides the interest rate on PPF. The EPF rate is decided by a central board of trustees with the Employees’ Provident Fund Organisation (EPFO), including the labour minister.