Summary of this article
EPFO has traced 1.18 lakh inoperative accounts with less than Rs 1,000 and plans to auto-refund the balances to subscribers.
The refund system will use Aadhaar-linked bank accounts and penny-drop verification to speed up claims.
The pilot may later expand to more subscribers.
The Ministry of Labour and Employment has successfully traced 118,000 inactive Employees’ Provident Fund Organisation (EPFO) accountholders. Of the total 711,000 inactive accounts with less than Rs 1,000 lying unclaimed in their EPF accounts, these traced accounts (around 17 per cent of the inactive accounts) will receive automatic refunds without the need to initiate any claim on their part. Some of these unclaimed EPF accounts are years old, while some of them are even decades old.
In February this year, Labour Minister Mansukh Mandaviya had announced that such unclaimed funds in inactive accounts would be automatically transferred without needing a request for transfer from subscribers. The minister announced that the unclaimed funds will be directly transferred to the subscribers’ Aadhaar-linked bank accounts.
To facilitate the automatic refund, the Centre for Development of Advanced Computing (C-DAC), an entity under the Ministry of Electronics and Information Technology, has been given the responsibility of upgrading the necessary software, according to a report by Hindu Businessline. The software will facilitate auto-credit of PF amounts directly in the verified bank accounts of the subscribers.
Reportedly, around Rs 30.52 crore is lying idle in 711,000 inoperative EPF accounts. The ministry expects this system to be fully operational for auto-refund by the end of August 2026. If the pilot project of auto-refund becomes successful, it could be expanded for an additional 2.47 million subscribers, who have more than Rs 1,000 unclaimed amounts in their inactive EPF accounts.
Verifying Bank Details
In the process of identifying bank accounts to transfer the unclaimed funds, the organisation is following the ‘penny drop’ exercise, under which a small amount, for example Re 1, is transferred into the Aadhaar-linked bank account of the subscriber to verify that the details are correct and the funds will reach the right person.
This exercise will also help in identifying cases where the subscriber is deceased. While the bank accounts have been identified based on this exercise so far, the ministry is still working to make the software more comprehensive and include individual data in respective profiles.
Besides this, the focus is on devising a feature where the software itself can identify unclaimed EPF accounts, the respective bank account details, and create a system-generated claim. At present, the system is equipped only to respond when a claim is initiated by the subscriber.
The ministry is also trying to eliminate manual intervention and administrative hurdles in the refund process by making it automatic. While EPFO has made the scheme-related rules flexible, such as automatic withdrawal for claims up to Rs 5 lakh for various reasons, the execution depends on its IT infrastructure and software. Thus, keeping it upgraded is necessary.
Inoperative EPF Accounts
EPF came into being to provide social security to its subscribers. But due to a lack of transparency and old systems and processes, many of the subscribers have lost track of their EPF accounts while changing jobs during their long career span. Once forgotten, account details get lost.
Earlier, it involved a lengthy process to trace the account details and claim the funds. Now, an account can be traced even if it is forgotten and has become inactive (an account becomes inoperative when there is no contribution in the account for consecutive 36 months). According to estimates, around Rs 10,903 crore is lying unclaimed in 3.18 million inoperative EPF accounts that have been opened in the last 20 years.
According to data shared in a reply in Parliament, there was Rs 1,638.37 crore lying as unclaimed funds in inoperative EPF accounts in financial year 2019, which increased to Rs 8,505.23 crore in financial year 2024.
