Source: IE
Context:
The Government of India has sought the Reserve Bank of India’s (RBI) oversight over two major social security institutions — the Post Office Savings Bank (POSB) and the Employees’ Provident Fund Organisation (EPFO) — to strengthen internal controls, ensure transparency, and improve fund management practices.
Key Developments:
- Government’s Proposal:
- The Department of Posts and the Ministry of Labour & Employment have written separately to the RBI seeking supervisory and advisory intervention for POSB and EPFO, respectively.
- The move follows serious lapses detected in internal control and fund management practices across both entities.
- Post Office Savings Bank (POSB):
- Audit Findings: Over 60 cases of misappropriation across 14 postal circles revealed “manual manipulation” of the Sanchay Post database.
- The Department has proposed an MoU with RBI to review internal processes and strengthen fraud prevention mechanisms.
- POSB currently functions under the Ministry of Finance and falls under the Payment and Settlement Systems Act, 2007, already giving RBI partial authority over payment-related functions.
- Employees’ Provident Fund Organisation (EPFO):
- The Ministry of Labour sought RBI’s guidance on EPFO’s fund management and investment practices in February 2025.
- RBI’s Findings:
- Flagged accounting anomalies, including lack of mark-to-market valuation and absence of loss provisioning.
- Highlighted a conflict of interest between EPFO’s roles as regulator and fund manager.
- Recommended separation of regulatory and investment functions.
- Advised EPFO to conduct actuarial assessments and adopt a gradual diversification into equities and alternative assets.
