The Central Board of Trustees, which is the apex decision-making body of the Employees' Provident Fund Organisation (EPFO), met on Monday and approved the interest rate.
According to sources, the body had surplus funds, which enabled the interest rate to be increased from 8.5% in the previous financial year (2012-13).
The EPFO's recommendation will be vetted by the finance ministry. Once the ministry approves the decision, the interest would be credited to the accounts of subscribers.
According to sources, the decision to enhance the rate was taken in view of the forthcoming Lok Sabha polls.
The EPFO is estimated to have an income of Rs. 20,796.96 crore in the current financial year.
Payment of interest at the rate of 8.5% to subscribers would have required Rs. 20,740 crore and left a surplus of Rs. 56.96 crore, according to earlier projections.