Source: TOI
Context:
The government has approved automatic settlement of small balances in inoperative provident fund accounts to reduce unclaimed funds and simplify benefit delivery.
The reform will be implemented by the Employees’ Provident Fund Organisation (EPFO).
What the Reform Provides
- Automatic refund of inoperative EPF accounts with balances up to ₹1,000.
- No application or claim filing required from the member.
- Amount will be credited directly to Aadhaar-linked bank accounts.
- Initially implemented as a pilot project.
What Is an Inoperative EPF Account?
After the 2016 amendment to the EPF Scheme:
- An account becomes inoperative only after the member turns 58 and does not withdraw the balance.
- Mere inactivity or lack of contribution does not automatically make it inoperative.
- EPF accounts earn interest until age 58; interest stops once they become inoperative.
Rationale Behind the Move
- Large number of small balances remain unclaimed due to paperwork barriers.
- Administrative cost of processing tiny claims is high.
- Dormant accounts complicate fund management and record-keeping.
- Supports digital governance and direct benefit transfer architecture.
