Raghavendra Shenoy 6 months ago

What is worse is that in case of switching jobs, the employee has to correspond and wait endlessly for the PF accumulations to be transferred. The thick skinned babus don't give a damn to the concerns of employees and don't care to respond either. I am personally stuck in a situation where my previous employer has dispatched a cheque for the PF accumulations, but the same is yet to be deposited in my new PF account. YE HAI INDIA

M G WARRIER 6 months ago

Copied below is a response to a report in Economic Times dated September 16, 2010. Thought it may be relevant in the context of the present position(I am not able to find out whether it was published by ET):

Unclaimed EPF money

This refers to the report on Employees’ Provident Fund interest rates (ET, September 16). While the hike in interest rates is a welcome move, the decision not to pay interest on inoperative accounts has far reaching implications. The proposal is to freeze about 3 crore EPF accounts in which there is no fresh contribution during the past three years or more. Earlier reports show that the unclaimed deposits in EPF accounts increased from around Rs 6000 crore in 2008-09 to about Rs 10,000 crore in one year. Interest accretion in 2008-09 balance may be around Rs 500 crore and the remaining Rs 3500 crore has to be balances in inoperative accounts added in one year. In a corpus of the fund running into about three lakhs crores this may look small. But the number of dormant accounts (more than half of the 5.6 crore accounts to date, 2009-10) is a matter of concern.

The EPFO is claiming that the decision not to pay interest is aimed at discouraging members of EPF from using the accounts as an investment conduit for earning higher returns. Viewed from any angle, the decision not to pay interest on unclaimed accounts older than three years sounds arbitrary. Keeping balances in one’s provident fund account cannot be considered a crime, as such facilities in social security schemes are not unheard of. Our own Public Provident Fund Scheme has an enabling provision to keep balances after maturity with accrual of interest at normal rates. And, it is irrational to ask the account holder to take away the maturity proceeds on a fine morning and search other avenues for investment. His membership was compulsory and was meant to provide him financial security in his old age.

As the EPFO is managing a large corpus of about Rs 1, 70,000 crore in the fund wisely, it should not cite administrative costs on just Rs 10,000 crore as a burden and deny normal interest payment till the organization is able to reach the money to the rightful beneficiaries or the later has a use for the hard earned PF money and opt to withdraw available balances.

If the EPFO finds the accounts unmanageable, they could consider transferring them to banks like SBI with legislative support from GOI to create a separate fund and allow continuity in transactions at par with PPF accounts. Or, better still, the unclaimed balances may be entrusted to a Mutual Fund on agreed terms, with the condition that claims (balance on the date of transfer plus accrued interest at the same rate as paid on EPF annually) of account holders will be met as and when they arise with a minimum interest accrual at those paid on EPF from time to time. Appropriating such balances to the EPFO or GOI sounds irrational.

GOI and RBI may look at the issue from a social security angle, lest people lose faith in government-sponsored savings instruments and social security measures.

M G Warrier
Mumbai
September 16, 2010