Labour ministry, RBI hold discussions to ease PF withdrawal

EPFO is revamping its work processes and IT network to hasten the services following long-standing grievances of cumbersome procedures for settlement of claims.

The Union labour ministry has begun discussions with the Reserve Bank of India (RBI) and other banks on rolling out new services for subscribers of the Employees’ Provident Fund Organisation (EPFO), such as direct access to savings deposits through ATMs and e-wallets linked to bank accounts, an official said, requesting anonymity.

The labour ministry has also proposed e-wallets where EPFO members will be able to receive their provident funds claim, according to the official. (HT Photo)

The State-backed retirement fund manager is currently revamping its work processes and information technology network for speedier services following long-standing grievances of cumbersome procedures for settlement of claims and pensions.

Ready withdrawal of provident fund savings up to a certain ceiling with an EPFO account-linked ATM card is among several features to be rolled out likely by January 2025 after the revamp is completed, according to the official cited above.

Currently, only in cases of auto settlement of claims does the money go directly to the bank account of a subscriber, which can be then withdrawn from teller machines.

The labour ministry has also proposed e-wallets where EPFO members will be able to receive their provident funds claim, according to the official.

“We have already reached out to RBI and banks on launching these services,” the official said.

Provident funds provide retirement income for nearly all of salaried Indians in the formal sector, with nearly 70 million subscribers. They are often the key corpus of lifetime savings for the working people.

EPFO’s workflows are being reworked to eliminate unnecessary steps and minimise human interface in the process of settlement of claims, which will pave the way for direct withdrawal of cash through ATM.

Preliminary discussions with banks and RBI are underway to integrate provident fund e-wallets into bank accounts of subscribers, the official cited above said.

“Our ambition is to have an information technology system that is of the level of our banking system, which is globally comparable,” labour secretary Sumita Dawra had said on December 13.

Reforms under implementation include centralised claim settlements, end-to-end auto-processing, centralised monthly pension disbursements, universal account number (UAN)–based accounting, restructured electronic challan-cum-receipt (ECR) with due statement and remittance challan, the official said.

The savings interest rate offered by EPFO, at 8.25% for FY24, is a widely watched metric of the salaried middle class.

The retirement fund manager has often faced complaints from employees about delays in transactions or resolution of issues, such as correction of misspelt names or phone numbers. These details are critical for subscribers to access their corpus of savings.

As part of reforms already completed in the last six months, members can now access their provident fund documents in Digilocker, a state-backed cloud storage app, and file claims through the government’s Umang app. Pensioners can now upload life certificates digitally, which are required to be submitted to banks annually, to continue receiving benefits. Earlier, these had to be physically submitted to banks.

“Along with these measures, the government should consider other imperative reforms. It should consider increasing the wage ceiling of ₹15,000, which is nothing in current times,” said TN Karumalaiyan, the general secretary of the Centre for Indian Trade Unions.

An employer and worker both are required by law to contribute 12% of a person’s basic salary towards a corpus managed by the EPFO.

Of an employer’s total contribution towards provident fund, 8.33% goes towards EPFO’s employees’ pension scheme and 3.67% goes towards provident fund every month, payable on a maximum wage ceiling of ₹15,000.

Among a slew of changes to ease processes, the labour ministry will switch to a centralised pension-payment system from 2025, allowing retirees to receive monthly payouts from any bank or its branches in any location throughout the country, for which a largescale test run was recently carried out.

The tech-based system will eliminate the need to move payment orders physically from one bank or location to another in case beneficiaries change their banks or place of residence.

The move will cover nearly 7.8 million subscribers of the Employees’ Pension Scheme 1995, a “defined contribution, defined benefit” financial security plan applicable for all employees with a wage ceiling of ₹15,000 a month, the official said.