CHENNAI: Days after reports suggested that the Union Ministry of Labour and Employment may automatically refund inoperative EPFO accounts to bank accounts, experts said this move may face some legal and practical implementation in the short-term period.
Currently, there are 31.86 lakh inactive accounts holding a combined balance of Rs 10,903 crore across the country.
Amrita Tonk, Partner at CMS INDUSLAW, said, “It will require accurate data management and strong governance. The proposed mechanism may present legal and operational challenges including - disputes among nominees and legal heirs which may slow down settlements, especially if the nomination records are outdated, ensuring accurate Aadhar-bank linkage to avoid mismatched details leading to failed transfers, and the risk of erroneous transfers or potential frauds.”
Adil Ladha, Partner at Saraf and Partners, “In an auto-refund system, issues such as missing or outdated nominations, incomplete backend records and KYC mismatch would be practical changes that the EPFO may face.”
Suggesting measures to tackle this potential discrepancy, Tonk added, “To mitigate these challenges, there will be a need to implement robust internal controls, ensure regular updation of nomination records, securing the digital infrastructure and maintenance of detailed transaction records.”
Ladha said the project would avoid multiple claims and litigation being filed, along with closing the hanging accountability loop in respect of such amounts.
This pilot project is part of the government’s EPFO 3.0 scheme under which it focuses faster online settlements with reduction in processing time. Recently the EPFO had streamlined the withdrawal process by merging 13 separate withdrawal categories into just three, which includes UPI. Overall, the EPFO reforms aim to enhance efficient, reduce paperwork and improve the ease of access to EPF benefits.