The Employees’ Provident Fund Organisation (EPFO) has triggered widespread outrage with its newly-approved withdrawal rules which many see as a blow to India’s salaried class. Under the revised framework, employees who lose their jobs will have to wait 12 months instead of two to fully access their provident fund savings, while complete withdrawal of pension funds will be allowed only after three years of unemployment. Adding to the discontent, EPFO has mandated that 25% of every member’s accumulated savings must remain locked in their account until retirement — effectively denying workers full control over their own money. Critics argue that the move undermines financial security during emergencies and reflects the government's apprehension over rising unemployment. Opposition leaders and industry experts have condemned the policy as ‘anti-worker’ and ‘regressive’, warning it could deepen financial distress for millions of households already battling job instability.
At its 238th central board of trustees (CBT) meeting, chaired by Union minister for labour Mansukh Mandaviya, EPFO approved sweeping changes to withdrawal protocols that have drawn sharp criticism from political leaders and industry representatives. At the centre of the controversy lies a fundamental tension between access to liquidity and retirement security.
The revised structure consolidates withdrawal provisions into three distinct categories. Under the essential needs category, members can withdraw for medical treatment, education-related expenses, and marriage costs — with education-related withdrawals now permitted up to 10 times and marriage withdrawals up to five times. The housing needs category covers property-related financial requirements, while special circumstances include situations such as natural calamities, epidemic outbreaks and continuous unemployment, notably without requiring members to justify their withdrawal reasons.
Members can now access up to 100% of their eligible provident fund (PF) balance, encompassing employee and employer contributions. However, the mandatory retention of 25% as a minimum balance means effective access is limited to 75% of the total corpus. The minimum service period for partial withdrawals has been standardised to 12 months across all categories, eliminating previously varied requirements.
The most controversial aspect of the reforms involves dramatically extended waiting periods for full fund access following job loss. Workers who could earlier withdraw their provident fund after just two months of unemployment must now wait a full year. The pension component withdrawal timeline has been extended even further, from two months to three years of continuous unemployment.
Saket Gokhale, a member of Parliament (MP) from Rajya Sabha and national spokesperson for the All India Trinamool Congress (AITC), launched a scathing critique on social media, calling the policy ‘open theft of salaried people’s own money’. He questioned how middle-class individuals facing sudden unemployment could manage financial obligations when their own savings remain inaccessible for 12 months.
Mr Gokhale suggested the modifications reflect government anxiety over rising unemployment, framing the rules as a defensive measure to prevent mass withdrawals from the EPFO system. He urged an immediate reversal of what he termed 'draconian' policies that penalise workers for wider economic mismanagement.
Another major point of contention involves the mandatory retention of 25% of provident fund balances throughout a worker’s career. While the EPFO describes this as a safeguard ensuring adequate retirement savings—allowing members to benefit from the current 8.25% annual interest rate with compounding advantages—critics view it as an arbitrary restriction on personal funds.
This provision means that even in financial emergencies, subscribers can access only three-quarters of their accumulated savings, with the remainder locked until retirement.
Industry Voices Raise Alarms
According to a report by The Indian Express, KE Raghunathan, a former member of CBT and an employers’ representative, condemned the decision as ‘deeply concerning and regressive’, arguing that it fundamentally weakens social security protections for workers living paycheck to paycheck.
“Provident fund savings are not meant to be treated as recurring deposits for short-term liquidity,” Mr Raghunathan says. He warned that enabling repeated full withdrawals could leave millions with insufficient retirement funds precisely when they need them the most.
He also expressed dismay at trade union support for the changes, suggesting they prioritise immediate needs over long-term worker welfare. Speaking with the newspaper, Mr Raghunathan described the reforms as dismantling a safety net that generations have relied upon, calling them “a step backward in our commitment to social protection.”
Despite the backlash, authorities maintain that the reforms enhance accessibility while preserving retirement security. The consolidation of 13 complex withdrawal provisions into three streamlined categories—essential needs, housing needs and special circumstances—aims to reduce confusion and administrative delays affecting 300mn (million) members managing a corpus of about Rs30 lakh crore.
The revised framework does introduce certain liberalisations: education-related withdrawals are now permitted up to ten times up from three previously; marriage withdrawals have increased to five occasions; and justification requirements for special circumstance withdrawals have been eliminated. The minimum service requirement for partial withdrawals has been standardised at 12 months, down from five to seven years depending on the purpose.
Balancing Liquidity & Security
The controversy ultimately reflects competing philosophies about the purpose of provident funds. Government officials emphasise long-term corpus building, with the 25% minimum balance designed to ensure compound growth over a worker’s career. Critics, however, contend that such restrictions on personal savings during employment crises prioritise systemic stability over individual hardship.
As the debate intensifies, one question remains unresolved: Should provident funds function primarily as retirement instruments with limited pre-retirement access, or should workers retain greater control over their own accumulated contributions during financial emergencies?
The coming months will reveal whether EPFO stands firm or yields to mounting pressure for modifications that balance retirement security with urgent liquidity needs.
