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The Centre on Friday approved the 8.1 per cent rate of interest on employees' provident fund deposits for FY22.

At 8.1 per cent, the rate for the last fiscal would be at a near four-decade low.

In March, the Central Board of Employees' Provident Fund Organisation (EPFO) proposed to pay 8.1 per cent rate of interest on provident fund deposits for the current financial year, which has now got the Centre's nod.

In FY21, interest rate of employees Provident fund was 8.5 per cent.

The EPFO is the country's largest retirement fund and the second largest non-banking financial institution with a corpus of about Rs 16 lakh crore.

While giving rationale behind the interest rate cut, Union Finance Minister Nirmala Sitharaman had said the proposal to cut interest rate paid on employees' provident fund deposits was dictated by today's realities where returns on other small saving instruments were even lower.