Retirement
Half of the money with EPFO Nagpur office is unclaimed deposits!

An RTI query revels that the Nagpur office of the EPFO (Employees Provident Fund Organisation) has almost half its current deposits in the ‘unclaimed’ category! The story is the same across the country. As per the latest rules, unclaimed deposits will now also stop earning interest 

 
An RTI application filed by Abhay Kolarkar found out that the Nagpur office of the EPFO (Employees Provident Fund Organisation) has almost half its current deposits in the ‘unclaimed’ category! Out of a total of about Rs308 crore, about Rs145 crore is dormant or unclaimed. As per the latest rules, all these unclaimed deposits will now also stop earning interest and, and for all we know, will also attract some holding charges. It is quite possible that funds are siphoned off by fraudsters. 
 
On the other hand, the Australian government, has taken all funds below 2,000 Australian dollars lying inactive in any account—savings or superannuation linked—for a year or more and transferred them to itself, so that it can protect the people from the money from being siphoned off. These funds will continue to earn interest, while the government tries to locate their rightful owners or heirs.
 
In India, the EPFO or the banks, despite having full contact details of depositors as well as their nominees and next of kin, won’t even make a phone call, send an email or drop an intimation letter. If you go to claim your own money, they will treat you with suspicion at every step, going as far as doubting your genuine documents presented personally, be it passport, PAN card, Aadhaar, driving licence, and what not. In the latest episode, an acquaintance was asked to get an affidavit re-verified by an elected representative. We all know what this means. No wonder people from the current generation, involved in changing jobs frequently, think of their EPF contributions as a tax rather than a savings instrument.
 
Recently, I received an email from an ex-colleague, who now lives abroad, with whom I had worked about 23 years ago, asking me for help to get his Provident Fund money back. In order to learn how the EPFO process works as well as help my ex-colleague, I decided to try and figure out the whole thing.
 
My colleague had not followed up because he was under the impression that the money lying with the EPFO was earning interest and would come to him automatically at the age of 58, or to his nominee. With computerisation, he assumed that pending as well as dormant accounts would surface one day, as though by magic, and would be able to trace his dues by name, father's name, company's name and so on. 
 
In his case, in the course of about five years starting in the late 1980s, he had worked for, let us say, company ‘A’, which merged with company ‘B’. The merged entity got renamed to company ‘C’ which was finally absorbed into the parent group company ‘D’. All its employees were transferred to yet another company ‘E’, which operated outside the parent group. The registered offices for A, B & C were located Mumbai, the registered office for ‘D’ was in a small town, and the registered office for ‘E’ was in Chennai. Prior to this episode, my ex-colleague had worked in Company ‘Z’, with their offices situated in Delhi. Way back in 1989, his transfer of Employee Provident Fund (EPF) from ‘Z’ to ‘A’ was hitting the walls of ‘babudom’. Now, ‘Z’ doesn't exist anymore nor does A,B,C and E. 
 
Here’s what I did:
 
• Emails have been sent to the companies ‘D’ and ‘E’ as well as the parent group where I worked, for information on how to proceed in this case, since all documentation appears to have gone adrift. Parent group where I worked has, however, been divided between heirs.
• Right to Information (RTI) applications will be prepared and sent to the headquarter offices of the Employees Provident Fund Organisation (EPFO).
• There are no known guidelines on what is to be done in case somebody wants to get more details about their dormant unclaimed amounts. Online data on this does not exist.
 
Likewise, I had worked with a shipping company, Indian flag, and never saw my Provident Fund money, which was earned from 1975 till 1981. The company, then listed, had vanished while the parent group is still around. Having been pilfered twice over, the Seaman's Provident Fund is, and was, one of those spectacular scams which still echoes.
 
The EPFO took some steps to fix matters, but appear to have come to a standstill again, as even their ePassbook scheme appears to have gone off the horizon again. Is this the best that our government can do, if we assume that 40% or more of all deposits lying with the EPFO are ‘unclaimed’, for any reason? 
 
(Veeresh Malik had a long career in the Merchant Navy, which he left in 1983. He has qualifications in ship-broking and chartering, loves to travel, and has been in print and electronic media for over two decades. After starting and selling a couple of companies, is now back to his first love—writing.)
 

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COMMENTS

Raghavendra Shenoy

4 years ago

What is worse is that in case of switching jobs, the employee has to correspond and wait endlessly for the PF accumulations to be transferred. The thick skinned babus don't give a damn to the concerns of employees and don't care to respond either. I am personally stuck in a situation where my previous employer has dispatched a cheque for the PF accumulations, but the same is yet to be deposited in my new PF account. YE HAI INDIA

REPLY

Veeresh Malik

In Reply to Raghavendra Shenoy 4 years ago

Dear Raghavendra Shenoy, thank you for writing in, and you are not alone. Over the last few years it seems things have really deteriorated, if some ex and present employees are to be believed, and processes have become so complicated that withdrawals are difficult if not impossible without "help".

We do need to build some sort of a group, I think.

rgds/VM

M G WARRIER

4 years ago

Copied below is a response to a report in Economic Times dated September 16, 2010. Thought it may be relevant in the context of the present position(I am not able to find out whether it was published by ET):

Unclaimed EPF money

This refers to the report on Employees’ Provident Fund interest rates (ET, September 16). While the hike in interest rates is a welcome move, the decision not to pay interest on inoperative accounts has far reaching implications. The proposal is to freeze about 3 crore EPF accounts in which there is no fresh contribution during the past three years or more. Earlier reports show that the unclaimed deposits in EPF accounts increased from around Rs 6000 crore in 2008-09 to about Rs 10,000 crore in one year. Interest accretion in 2008-09 balance may be around Rs 500 crore and the remaining Rs 3500 crore has to be balances in inoperative accounts added in one year. In a corpus of the fund running into about three lakhs crores this may look small. But the number of dormant accounts (more than half of the 5.6 crore accounts to date, 2009-10) is a matter of concern.

The EPFO is claiming that the decision not to pay interest is aimed at discouraging members of EPF from using the accounts as an investment conduit for earning higher returns. Viewed from any angle, the decision not to pay interest on unclaimed accounts older than three years sounds arbitrary. Keeping balances in one’s provident fund account cannot be considered a crime, as such facilities in social security schemes are not unheard of. Our own Public Provident Fund Scheme has an enabling provision to keep balances after maturity with accrual of interest at normal rates. And, it is irrational to ask the account holder to take away the maturity proceeds on a fine morning and search other avenues for investment. His membership was compulsory and was meant to provide him financial security in his old age.

As the EPFO is managing a large corpus of about Rs 1, 70,000 crore in the fund wisely, it should not cite administrative costs on just Rs 10,000 crore as a burden and deny normal interest payment till the organization is able to reach the money to the rightful beneficiaries or the later has a use for the hard earned PF money and opt to withdraw available balances.

If the EPFO finds the accounts unmanageable, they could consider transferring them to banks like SBI with legislative support from GOI to create a separate fund and allow continuity in transactions at par with PPF accounts. Or, better still, the unclaimed balances may be entrusted to a Mutual Fund on agreed terms, with the condition that claims (balance on the date of transfer plus accrued interest at the same rate as paid on EPF annually) of account holders will be met as and when they arise with a minimum interest accrual at those paid on EPF from time to time. Appropriating such balances to the EPFO or GOI sounds irrational.

GOI and RBI may look at the issue from a social security angle, lest people lose faith in government-sponsored savings instruments and social security measures.

M G Warrier
Mumbai
September 16, 2010

REPLY

Veeresh Malik

In Reply to M G WARRIER 4 years ago

Dear MG Warrier ji, thank you for writing in, and you have raised many valid points.

The biggest issue is that top down at EPFO, the attitude that the decision makers as well as rank and file have is that they are holding on to some sort of tax imposed on members, and that only if you are from some segment of twice-blessed or similar, are you entitled to get your own money back. What they call "claim" is actually in real fact my "due".

Since a large number of claimants, however, are usually unable to understand the complicated steps involved as well as are often in dire need, there are all sorts of twists and turns which then require a typical solution.

And your last line - prophetic. Maybe that is why so many ponzi and MLM schemes succeed?

rgds/VM

M G WARRIER

In Reply to Veeresh Malik 4 years ago

These kind of issues do not get media space. Government plays into the hands of those who corner small people's savings and make fortunes. There are several examples. In different ways, New Pension Scheme, routing subsidy through AADHAAR-enabled bank accounts are all pointers to this game.

Veeresh Malik

In Reply to M G WARRIER 4 years ago

We can all help by spreading these articles. Nothing works like the will of the masses, and for that there has to be knowledge shared.

thanks/rgds/VM

Will the announced reforms be implemented?

All eyes are on the mood and tone of the Winter Session of Parliament. A plethora of changes are on the table and if the Monsoon Session is anything to go by, reformists will have a tough time

 

The Winter Session of Parliament, which begins on Thursday, will be a very important gauge as to the extent to which the announced reforms are being implemented. The direction of reforms in the coming months will depend on whether the ruling UPA government becomes stronger or weaker out of this winter session. This is the assessment of Nomura in its Asia Insights report.

 

Nomura does not see the UPA government at risk as the Congress has both inside (DMK, NCP, others) and outside (SP, BSP) support to tide over a no-confidence vote, in case the motion is raised, which itself is uncertain. The SP and the BSP are opposed to FDI (foreign direct investment) in multi-brand retail, but otherwise continue to support the government from outside. In terms of the reforms, Nomura expects the Companies Bill, Competition Bill, Banking Law and Forwards Contract Bill to sail through smoothly, but Insurance, Pension and Land Bills may face much more opposition.

 

Nomura’s worry is that even a discussion on FDI in multi-brand retail will lead to heated debates and could lead to disruption in parliamentary proceedings. If the debate on FDI in multi-brand retail is put to rest soon, there is hope that other reforms will also be passed. However, the Monsoon Session of Parliament did not inspire much confidence as the stand-off between the government and the opposition parties on issues of graft and corruption led to a complete washout of the parliamentary session. There is a risk that the Winter Session could go down the same road.

 

Media reports suggest that the TMC chief has not been able to gain enough support for the no-confidence motion, so the likelihood of the government falling is small. Instead, the government may choose to debate the thorny issue of FDI in multi-brand retail in parliament, as it is an executive decision and does not require parliamentary approval.

 

Pending reforms

 

According to Nomura, some of the reforms announced by the government since September 2012 that will come up for approval during the Winter Session of Parliament include:

  • Insurance Laws (Amendment) Bill: Increase the cap on foreign equity in insurance sector to 49% from 26% and allow foreign reinsurers to operate in India
  • Pension Fund Regulatory and Development Authority Bill: Set up a stronger pension regulatory body, and increase the foreign investment ceiling to 26%, or the limit in the insurance sector, which ever is higher.
  • Companies Bill (Amendment), 2011: Improve the standards of corporate governance.
  • Banking Laws (Amendment) Bill: Pave the way for the RBI to give new banking licenses to private participants in the sector.
  • Land Acquisition Rehabilitation and Resettlement Bill: To make the process of land acquisition transparent.
  • Direct Tax Code Bill: Simplify and consolidate the direct tax regime for individuals and corporates.
  • Forwards Contract (Regulation) Amendment Bill: To set up an independent regulator of the forward commodity markets and allow institutional investors and derivative instruments.
  • Competition Act (Amendment), 2002: To bring all sectors under the purview of the Competition Commission of India, except stressed banks or insurers.

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LIC, EPFO to pick up AI’s Rs7,400-crore bond issue at 9.08%

The NCD issue is part of the revival plan of the debt-laden national carrier, which was given a Rs30,000-crore bailout by the government in April

 
Mumbai: Life Insurance Corporation of India (LIC) and the Employees Provident Fund Organisation (EPFO) have agreed to fully subscribe to the Rs7,400 crore bond sale of national carrier Air India, reports PTI quoting a top SBI Caps official.
 
“Life Insurance Corporation and the EPFO have agreed to purchase the entire Rs7,400-crore non-convertible debentures (NCDs) being sold by Air India. However, the bond sale programme will continue to remain open till 18th December,” a senior official of SBI Caps, which is the sole arranger to the issue, told PTI, on condition of anonymity.
 
The 19-year-old issue has a coupon of 9.08% and will fetch 9.27% for LIC and the EPFO on maturity, he added.
 
According to an Air India official, LIC has subscribed to bonds worth Rs3,000 crore and the remaining by EPFO.
 
When contacted, Air India finance director S Venkat refused to talk, saying only the spokesperson could comment.
 
Calls to the Air India spokesperson did not elicit any response.
 
The NCD issue is part of the revival plan of the debt-laden national carrier, which was given a Rs30,000-crore bailout by the government in April.
 
Accordingly, Air India will have to use the NCD proceeds to retire a good part of short-term working capital loans taken from 19 different banks.
 
The bailout package also included an upfront equity infusion of Rs6,750 crore and an assured equity support of Rs23,481 crore until 2020-21.
 
As of last December, Air India had a debt of Rs43,777 crore on its books and an accumulated loss of Rs27,000 crore from the past five years.
 
The debt includes those taken for purchasing 27 Boeing Dreamliners, of which only three have been delivered so far, and nearly 60 other planes from Airbus.
 
The issue has an AAA rating from India Ratings, the domestic services of Fitch, reflecting the unconditional guarantee extended by the government to make timely repayment of principal and interest on the bonds.
 
India Ratings had said in a statement, “The proceeds of this NCD issue will be used to repay outstanding Rs73,91.67 crore short-term bank loans, interest thereon, as well as expenses in relation to the issue of the debentures and the government guarantee fee as may be applicable.”
 
The NCDs were issued early this month and have a tenor of 19 years, with principal redemption in five equal instalments starting from the 15th year and interest payments being made biannually, the rating agency said.
 
The NCD issue is a part of the government's restructuring plan for reviving the airline. The Cabinet Committee on Economic Affairs had on 12th April approved a financial restructuring plan for the airline, which included the issuance of the NCDs.
 
The bonds will be issued in three tranches—Series I of Rs3,000 crore, Series II of Rs1,000 crore, and Series III of Rs5 crore, according to India Rating.
 
In all three tranches the issuer has the option to retain additional subscription such that the total amount mobilised does not exceed Rs7,400 crore, the agency added.
 
The airline has to turn cash-positive by next fiscal and net profit by 2020, and SBI Caps is working on the revival plan for the airline.
 
Last week, the airline failed to sell four Boeing 777s as it did not find any takers. 
 

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