Why in news?

The Employees’ Provident Fund Organisation (EPFO) has about 31.83 lakh inoperative accounts, many of which have remained inactive for years. Around 41% have been inactive for 5–10 years, while 22% have been idle for more than 20 years.

To address this issue, the EPFO Central Board of Trustees, in its 239th meeting, approved auto-settlement of inoperative accounts with unclaimed balances of ₹1,000 or less, transferring the amount directly to the members’ registered bank accounts.

What’s in Today’s Article?

• EPF and EPFO: Meaning and Functions
• Inoperative EPF Accounts: Meaning and Status
• Auto-Settlement for Inoperative Accounts
• Status of Inoperative EPF Accounts in India
• Pilot Studies and Future Scope

EPF and EPFO: Meaning and Functions

• The Employees’ Provident Fund (EPF) is a government-backed retirement savings scheme.
• In this scheme, both the employer and the employee contribute a fixed percentage of the employee’s basic salary to the EPF account.
• The contributions earn interest over time, helping employees build a retirement corpus.
• The accumulated amount, including both contributions and interest, can be withdrawn at retirement or under specific conditions.
• Employees’ Provident Fund Organisation (EPFO)
  • EPFO is a statutory body established by the Government of India to administer provident fund schemes. It is managed by the Central Board of Trustees (CBT).
  • The CBT administers three main schemes:
    • Employees’ Provident Fund Scheme, 1952
    • Employees’ Pension Scheme (EPS), 1995
    • Employees’ Deposit Linked Insurance (EDLI) Scheme, 1976
  • EPFO supports the board’s functions through a network of 147 offices across India.

Inoperative EPF Accounts: Meaning and Status

• Inoperative EPF accounts are those provident fund accounts in which no interest is credited after a specified period. These typically belong to members who have retired after the age of 55.
• An EPF account becomes inoperative if no contribution is received for three consecutive years after the member turns 55 or retires, whichever is later.
• However, if the member is below 55 years and no contribution is made, the account continues to earn interest until the age of 58.
• As of March 31, 2025, there were 31.83 lakh inoperative accounts with deposits of about ₹10,181 crore, excluding accounts of international workers.

Auto-Settlement for Inoperative Accounts

• The EPFO Central Board of Trustees approved a pilot project for auto-settlement of inoperative EPF accounts with unclaimed balances of ₹1,000 or less.
• In the first phase, over 1.33 lakh accounts holding about ₹5.68 crore will be covered.
• Under this pilot, the money will be directly credited to members’ Aadhaar-seeded and EPFO-linked bank accounts, without requiring fresh claims or documents.
• If successful, the scheme may later be extended to accounts with balances above ₹1,000.

Status of Inoperative EPF Accounts in India

• The EPFO covers 27.05 lakh establishments and 34.63 crore members. Out of these, 7.98 lakh establishments actively contribute, covering 7.83 crore contributing members. EPFO manages a total corpus of over ₹28.34 lakh crore.
• Distribution of Inoperative Accounts by Duration
  • EPFO has 31.83 lakh inoperative EPF accounts.
    • 12.90 lakh accounts (40.52%) have been inactive for 5–10 years, holding about ₹3,402.25 crore.
    • 6.93 lakh accounts (21.75%) have been idle for over 20 years, with ₹1,018.20 crore.
    • 4.42 lakh accounts (18.12%) have been inactive for 3–5 years, containing ₹2,336.32 crore.
• Distribution by Account Balance
  • Most inoperative accounts have small balances.
    • 294.3 lakh accounts with balances up to ₹50,000 together hold ₹2,121 crore.
    • However, only 13,000 accounts with balances above ₹10 lakh contain ₹4,553.57 crore, indicating significant funds locked in a small number of accounts.
• KYC Verification and Auto-Settlement Eligibility
  • EPFO conducted KYC analysis to identify accounts eligible for auto-settlement, which will initially apply to Aadhaar-seeded accounts.
    • 1.33 lakh Aadhaar-verified accounts with balances up to ₹1,000 hold about ₹5.68 crore.
    • 0.23 lakh Aadhaar and bank-verified accounts hold around ₹1.09 crore.

Pilot Studies and Future Scope

• A pilot validation study is being conducted in 10 regional offices, focusing on accounts with balances up to ₹50,000.
• For accounts with balances above ₹1,001, there are:
  • 6.8 lakh Aadhaar-verified accounts holding ₹5,212.42 crore, and
  • 2.31 lakh Aadhaar and bank-verified accounts with ₹3,275.35 crore.
• These accounts may be considered for future phases of the auto-settlement initiative.