EPFO's New Withdrawal Guidelines
The Employees’ Provident Fund Organisation (EPFO) has introduced several modifications to facilitate easier withdrawal of funds by its members. These changes aim to provide more flexibility and address liquidity constraints for members in times of need.
Key Changes in Withdrawal Policies
- Full Withdrawal: Members can now withdraw up to 100% of their eligible balance and can make multiple withdrawals with liberalized limits.
- Partial Withdrawal Categories:
- Essential Needs: This category includes withdrawals for illness, education, and marriage.
- Housing: Withdrawals for housing purposes.
- Special Circumstances: Members can apply for withdrawals "without assigning any reason," easing the process.
Context and Implications
These changes are particularly relevant given the extensive use of EPFO funds by members during the COVID-19 pandemic to meet financial shortfalls and health expenses. Until May 21, 2021, around 76.31 lakh Covid-19 advance claims were settled. This adaptability reflects the needs of a young workforce, with recent data showing net payrolls averaging around 1.3 crore over the past three years, with approximately half being under 25 years of age.
Supervisory Improvements
- The EPFO’s board has approved forming a committee with the Finance Ministry, RBI, and the Ministry of Labour and Employment to enhance fund management and investment practices.
- The RBI has suggested separating regulatory and fund management functions, assessing liabilities rigorously, and strengthening risk management, especially considering past investments in companies like IL&FS.
- There are suggestions to diversify the investment portfolio, potentially increasing equity exposure to enhance returns, which requires careful deliberation due to its impact on the risk-reward profile of the EPF.
Overall, these initiatives aim to strengthen the EPF's role in the social security architecture of India, ensuring it remains a robust and adaptable financial tool for its members.
