The Employees Provident Fund Organisation (EPFO) has asked its regional offices to stop interest payments to members, pending the finalisation of the rate of interest for the fund.
An interim circular issued by the organisation said no interest should be added to the account of EPF subscribers with effect from April 1, 2003.
Instead, regional offices were advised to wait for the finalisation of the rate of interest on the EPF corpus, officials said. A decision is expected by the middle of this month.
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The EPFO was paying interest at 9.5 per cent to its 25 million subscribers in the private sector compared to the 7-8 per cent interest received from small savings and government bonds.
The Fund has been resisting any move to lower interest rates and claims it can support the higher interest rates from the earnings on its investment.
However, nearly 80 per cent of the investment by the organisation is in special deposit schemes, which the finance ministry has decided to phase out and replace with government securities yielding market rates of interest.
The move to keep the interest rates on EPF deposits unchanged has been spearheaded by successive labour ministers, including the current incumbent Sahib Singh Verma.
The officials also said the decision to freeze interest payments for now would not hurt the interests of subscribers, who may need to withdraw money during this period.
They said the difference would be made good to subscribers once the rates were finalised.
They said the interim order would ensure that there would be no need to duplicate the work of setting interest rates on the country