Opinion
Two ways for the EPFO to give itself an image boost
Summary
- India’s state-run retirement fund would do itself a favour by resolving its high level of claim rejections and speeding up payments. Millions of subscribers counting on it for their old age would take note of its digital makeover.
The proof of a retiral kitty’s worth is in the retiring. On this measure, the Employee Provident Fund Organisation (EPFO) has not made news in recent years that could impress its subscribers. As reported, it has had a rather high rejection rate of final settlement claims.
In 2022-23, it was reportedly at 34%, implying more than a third of all withdrawal applications were rejected. This rate was 13% in 2017-18.
Since a surge in bogus claims after EPFO processes went online seems like a minor explanation at best, the organization must release data in more granular detail—and sooner—for a clearer picture of the scenario.
To what extent are bona fide claimants facing rejection? If it’s mainly down to procedural glitches, such as data-entry mismatches that should not raise red flags, then these need to be sorted out quickly. Digital protocols may have had their own effects.
Also read: EPF interest delays: How it impacts compounding and tax filing
While the EPFO’s user interface on the internet has been welcome, what counts in the final analysis is the state-run retirement fund’s reliability at that moment of truth: When people ask for their hard-earned money saved up over the course of their careers.
For the EPFO’s digital makeover to claim credible success, it needs to show efficiency gains. A routine act like crediting subscriber accounts with interest dues, for example, could probably be speeded up, and the public-image gains would outweigh the trouble taken.
This year, like several earlier, many subscribers were left waiting more than six months after the completion of the year for which interest was due. True, delays are understandable in the context of inter-ministerial involvement in deciding the annual payout rate.
The EPFO board usually meets in March to set a rate of interest for the year based on the surplus at hand. This is sent for the finance ministry’s approval, which makes an economic assessment. In the past, it has sought a lower rate than proposed for various reasons.
It may make sense to retain some of the surplus as a buffer should future investment returns fall short, for example, or the economy may need a reduced rate gap with other market instruments to achieve better outcomes.
Once approved, the labour ministry notifies the rate and starts crediting it to accounts. All this could move faster. Ideally, the EPFO should mark a fixed date on the calendar by when subscribers would always get their annual balance boost.
To be sure, a delay does not result in any financial loss, as the transfer is for the past year. But it does complicate cases of retirees who withdraw their funds before the rate is set.
Also read: Government increases PF withdrawal limit to ₹1 lakh, likely to hike salary ceiling: Report
Moreover, the government’s move to tax employee contributions to the fund above ₹2.5 lakh each year necessitates accurate and quick information, so that subscribers can file their income-tax returns correctly and on time.
Since tax authorities match data received from tax deductors with taxpayer declarations, all payouts need to be processed fast, failing which taxpayers could end up facing discrepancy notices or worse.
As the EPFO runs the main retirement fund for countless workers in India’s vast organized sector, it must make it a point to address everything that hints of inefficiency. New enrolments, held up by the government as an indicator of formal employment, have been a source of pride in recent years.
That the economy is formalizing is good news. Institutionally, what the fund must always be is a reliable source of financial support for those who exit the workforce. A better record on payments, settlements or account credits would boost its image.
