In view of the proposed one per cent slash in interest rate on special deposit scheme from April, the Central Board of Trustees of Employees Provident Fund Organisation will meet on Friday to decide on the rate of interest on EPF for 2003-04.

Under pressure from the finance ministry to cut the rate of interest on EPF from the present 9.5 per cent, the meeting of EPFO board comes in the backdrop that SDS comprises over 80 per cent of over Rs 1,40,000 crore (Rs 1,400 billion) EPF corpus and that any cut in the interest rate on SDS would call for reduction in EPF rates, official sources told PTI on Thursday.

Though the finance ministry was of the view that the present interest rate on EPF was "high" considering the lower rates on other savings instruments, Labour Minister Sahib Singh Verma, who is the chairman of CBT, is not in favour of bringing down the interest rate and says there is no need for cutting it as EPFO had made "wise" investments in the past.

In this context, labour ministry sources said, "If we continue to get the same rate of interest on what we had invested earlier, then may be we can continue with the present rate."

Verma had been vociferous in saying that with the present rate of 9.5 per cent interest rate, the corpus would still have a surplus.

Taking a cue from the softer interest rate regime, Finance Minister Jaswant Singh had, in the Union Budget for 2003-04, announced one per cent reduction in interest rates on public provident fund and small savings scheme.

Finance ministry sources are sceptical of sustainability of continuing with a "high" interest rate of 9.5 per cent when rates on all the major investment instruments had fallen.

EPFO is understood to have invested around Rs 1,22,000 crore (Rs 1,220 billion) in SDS so far since its inception, apart from parking its funds in central and state government securities and bonds issued by the development financial institutions.

The total contributions collected by the EPF – under the Employees' Provident Fund Scheme, Employees' Pension Scheme and Employees Deposit Linked Insurance Scheme -- stood at Rs 15,790.77 crore (Rs 157.91 billion) in 2001-02.

The meeting would also brief the newly reconstituted EPF board on the housing scheme announced by Verma for the EPF members.