Social Security minister will propose lower rate cap on payroll loans

Social Security Minister Wolney Queiroz told Valor he plans to bring a proposal to the National Social Security Council (CNPS) at its meeting scheduled for later this month, aimed at lowering the interest rate limit on payroll-deductible loans for retirees and pensioners of the National Social Security Institute (INSS). He said he expects the measure to pass. Brazil caps rates on payroll loans backed by severance fund Government launches debt negotiation program for current informal workers Brazil credit delinquency hits record as debt stress deepens According to the minister, the government believes there’s now room to revisit the cap after holding it steady throughout the Central Bank’s rate-tightening cycle. During that stretch, he said, the government negotiated with the Brazilian Federation of Banks (Febraban) to keep payroll loan costs from rising. “We managed to work that out with Febraban and hold interest rates at the same level,” he said. The cap on payroll-deductible loans—the most common type of INSS payroll loan—has stood at 1.85% a month since it was approved in March 2025. Over that same period, the benchmark Selic rate climbed as high as 15% a year before easing to its current 14.25%. The minister said that when the Central Bank began cutting rates, Febraban asked the government to move cautiously rather than immediately pass those cuts through to the payroll loan cap. That grace period, in his view, has now run its course. “We believe that waiting period is behind us, and it’s time for the Social Security Council to start discussing a rate reduction at its upcoming meetings.” Asked whether the issue could come up at the CNPS meeting on July 28, the minister confirmed it could. “We can bring a proposal to cut the rate to the next meeting.” He said no decision has been made yet on where the new cap should land—the ministry’s technical staff will run the numbers and present them to council members ahead of the vote. Queiroz noted that the CNPS is a four-party body. “The most important interest rate in Brazil—the payroll loan rate—is set through a genuinely participatory process. It’s decided by a four-party council made up of representatives from the government, retirees, workers and employers,” he said. Separately, the government continues holding talks with the financial sector on a permanent formula for setting the payroll loan cap, which would cut down on the need for the council to weigh in case by case. The idea is a formula that accounts for both movements in the Selic rate and other costs borne by lenders. Febraban, the minister said, has yet to hand over all the data needed to build that formula, so talks continue. In a statement, the federation said any rate revision needs to reflect the real cost structure behind these loans and account for the forward interest rate curve matching the loans’ maturities—not just the current Selic rate. It also warned that setting the cap below lenders’ actual cost of credit could shrink the supply of loans to higher-risk borrowers, such as older beneficiaries and people with disabilities. Turning to measures for retirees, the minister said the government isn’t considering a dedicated debt-renegotiation program for INSS beneficiaries. He pointed to recent changes he says have already eased the group’s finances—stretching the maximum term on payroll loans from 96 to 108 months, and lowering the maximum payroll deduction limit from 45% to 40%. “That alone provides real relief. Anyone who’d hit the deduction ceiling effectively gained another year of borrowing room,” Queiroz said. He also said he considers the process of reimbursing retirees for unauthorized association-fee deductions from their benefits essentially wrapped up. More than R$3 billion has been returned to roughly 4.7 million retirees and pensioners, he said, adding that the Attorney General’s Office (AGU) is holding R$2.8 billion frozen to repay the federal treasury once the related court cases conclude. Queiroz also said audits conducted by the ministry helped inform the Federal Police’s investigation into investments made by state and municipal pension regimes (RPPS) in assets tied to Banco Master. He said police had asked the ministry to keep its technical reports under wraps for now, to avoid compromising the investigation. He was emphatic that federal pension funds had no exposure to Banco Master. “The pension funds—which together manage several trillion reais—don’t have a single cent invested there,” he said. Any exposure came from individual state and municipal RPPS funds exercising their own autonomy over asset allocation. He noted that Banco Master was authorized to operate by the Central Bank, which local fund managers took as a signal of security. “The manager saw what looked like an opportunity to invest there.” In his view, the episode raises broader questions about the criteria the Central Bank uses to authorize financial institutions and investment funds in the first place. Asked whether the government might act to keep RPPS funds from making riskier investments going forward, Queiroz said the regimes retain autonomy over where they put their money. The ministry’s role, he said, has been to issue audits, warnings and technical guidance to fund managers—guidance that, he noted, has already stopped any new RPPS investment in Banco Master since 2025 began.