KAP ’s Interest Rate Updates for Employee Benefits as on 31 March 2021
March 31, 2021
Introduction:
The past year has seen volatile Annualised Par Yields on Government Securities (G-Sec)/Discount Ratesdue to the pandemic lockdown and now rates seem to have stabilised a little nearer to one year ago.
The G-sec rates have increased significantly due to thestart of economic activity and return of normalcy due tounlocking compared to previous three quarters.
Rates as on 31-03-2021 for shorter tenures are still lower whencompared to 31-03-2020 Rates. However, there has been animprovement for when compared to rates as on 31-12-2020.
Rates for longer tenures seem less volatile and haveshown steady increase since Unlock 3.0 on account of thekick-starting of various economic activities.
For shorter tenures, decreasing G-sec rates when compared to31-03-2020, would lead to an Actuarial Loss due to change inFinancial Assumptions, if all other Assumptions remain the sameas last year.
Comments & Insights:
The G-sec rates have increased significantly due to the start of economic activity and return of normalcy due to unlocking compared to previous three quarters.
Rates as on 31-03-2021 for shorter tenures are still lower when compared to 31-03-2020 Rates. However, there has been an improvement for when compared to rates as on 31-12-2020.
Rates for longer tenures seem less volatile and have shown steady increase since Unlock 3.0 on account of the kick-starting of various economic activities.
For shorter tenures, decreasing G-sec rates when compared to31-03-2020, would lead to an Actuarial Loss due to change in Financial Assumptions, if all other Assumptions remain the same as last year
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Volatility in the Interest Rate March 2017 v/s June 2017
Employee Benefit Obligations are to be valued based on G-Sec rate of estimated term as prevalent at the end of the reporting period.
Topic to be covered: Volatility in the Interest Rate March 2017 v/s September 2017
Employee Benefit Obligations are to be valued based on G-Sec rate of estimated term asprevalent at the end of the reporting period.
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