February 18, 2025 - The Central Government is preparing to create a new fund to provide a fixed interest rate to subscribers of the Employees' Provident Fund Organisation (EPFO) every year. This fund will be called Interest Stabilisation Reserve Fund and benefit around 70 million people.

Ministry of Labour sources have said that the plan is still in the discussion stage. The Ministry of Labour and Employment has commissioned an internal study to determine how this fund will function and how much money will be placed in it.

Through this fund, the government wants to protect its subscribers from market fluctuations and separate the annual returns given to EPFO members from the earnings generated through EPFO's investments. In other words, the money remaining after interest payments to EPFO members each year will be deposited into this fund.

As per an official, “Once such a reserve is created, EPFO subscribers will get a steady interest on their Provident Fund deposits”.

The EPFO invests in various instruments, including exchange-traded funds. The interest paid to the subscirber for a particular quarter is decided based on the returns on these investments. Investments in the stock market often result in profit or loss. This leads to sudden and significant increases or decreases in the interest rate.

But once the Interest Stabilisation Reserve Fund is created, even if the stock market declines or interest rates fall in a particular year resulting in lower profits for EPFO, the subscriber will not have to bear the loss. The money from this fund will be used to ensure that EPFO members receive their full assured interest amount.

The Minister of Labour and Employment along with the central board of trustees of the EPFO are expected to meet soon to discuss the details for such a rule. For now, the discussions are at a preliminary stage and could take shape by the end of this year. Implementation of the rule is likely from 2026-2027.