Shivanand Pandit
Starting January 2025, subscribers of the Employees’ Provident Fund Organisation (EPFO) may gain a significant convenience: the ability to withdraw their provident fund (PF) savings directly from ATMs. The retirement fund body is actively developing a new facility that would allow members to use an ATM card to access their funds, much like they would access a traditional bank account. This initiative aims to simplify the withdrawal process and provide enhanced ease of access to subscribers.
The new system will introduce centralized claim settlement with end-to-end automated claim processing, centralized monthly pension disbursements, and Universal Account Number (UAN)-based EPF accounting. It will also feature a restructured Electronic Challan-cum-Receipt (ECR) system that includes a due statement and remittance challan, eliminating the need for transferring Member IDs (MIDs) when employees change jobs. In FY25, the EPFO implemented simplified IT processes and automated the processing of all types of EPF advance claims up to ₹1 lakh, enabling approximately 40% of advance claims to be handled in auto-mode.
The proposed ATM-based withdrawal feature is expected to come with certain limitations, such as withdrawal ceilings, ensuring prudent management of funds. The facility is projected to be rolled out by the middle of 2025, following the completion of a major upgrade to the organisation’s IT infrastructure. The EPFO’s modernization efforts are part of a broader initiative termed EPFO 3.0, which aims to overhaul its technological framework. The first phase of this upgrade is set to conclude by December 2024, while the entire project is expected to be completed by June 2025. The introduction of the ATM card facility for PF withdrawals is planned to follow shortly after the full implementation of the upgraded systems.
Labour Secretary Sumita Dawra has emphasized that the Ministry of Labour and Employment is dedicated to modernizing EPFO’s IT systems. This upgrade will streamline the process of PF withdrawals, improve overall service delivery, and reduce the dependency on human intervention for routine transactions. According to Dawra, the IT 2.1 phase of the upgrade is scheduled to go live next year, setting the stage for the EPFO’s systems to be on par with those of leading banks. Once these advanced systems are in place, subscribers, claimants, and insured individuals will benefit from a seamless, automated process for accessing their provident fund savings. This transformation is expected to significantly enhance user experience, reduce delays, and ensure greater transparency in the handling of EPFO funds.
The government has announced plans to introduce a dedicated PF withdrawal card, functioning similarly to an ATM card, as part of its ongoing efforts to enhance social security and simplify processes for employees. This innovative card will allow users to withdraw funds directly from their PF accounts. However, the withdrawals will be capped at 50% of the total PF balance to ensure the fund’s longevity and safeguard contributors’ savings. As a part of a comprehensive overhaul of the EPFO, unnecessary claim-processing procedures have been eliminated, leading to faster and more efficient services. These reforms aim to make the system more user-friendly, aligning with the government’s broader vision of improving the ease of living for citizens.
The government has also reaffirmed its commitment to extending social security benefits under the Code on Social Security, 2020, including provisions for gig and platform workers. Although a specific timeline for these benefits has not been provided, efforts are reportedly in advanced stages, signalling progress toward broader inclusion in the country’s social security net. Currently, the EPFO serves over 70 million active contributors, representing a significant portion of India’s workforce. Under existing rules, employees are not permitted to withdraw PF while employed. However, if an individual is unemployed for one month, they are eligible to withdraw up to 75% of their PF balance. After two months of unemployment, the entire balance becomes accessible. These withdrawal rules remain unchanged under the new system.
The government’s tech-driven reforms are set to revolutionize the process of PF withdrawals, making them quicker, more convenient, and highly efficient. This initiative is a key component of a broader effort to strengthen social welfare systems for India’s workforce, which includes over 64 crore economically active individuals. By harnessing the power of technology, the government seeks to extend the reach of social security benefits across the nation, promoting economic stability and enhancing financial security for its citizens.
Sources indicate that if the EPFO faces a liquidity crunch, it may address temporary shortfalls by securing cash credit from commercial banks. By the end of FY24, the total EPF corpus stood at ₹24.75 lakh crore, with approximately 63% of the funds invested in financial instruments such as government securities, corporate bonds, and exchange-traded funds. To establish a robust mechanism for this arrangement, the EPFO plans to hold consultations with the Reserve Bank of India and major commercial banks to develop a comprehensive roadmap.
Still a long way to go
The EPFO has been actively working to improve its digital infrastructure and streamline the claims process. Earlier this year, the EPFO launched the first of six modules of the Central IT System (CITS) 2.01. This initiative aims to simplify the process by enabling online submission of applications, validating data, and transferring members’ past accumulations. CITS 2.01 will replace the previous system that required the physical submission of extensive documents, allowing establishments to track applications using a tracking identity. Additional modules of CITS 2.01 are expected to be implemented starting 1 January 2025.
As of November 2024, the EPFO has reduced the rejection rate of claims to 25%. In the financial year 2022-23, the combined rejection and return ratio was 34%, while the previous year saw claim rejections reaching 35%. Claims are rejected when the claimant does not meet the eligibility criteria for the type of advance or withdrawal, while returned claims can be resubmitted after corrections. The labour ministry has noted that the implementation of CITS 2.01 has led to an increase in the number of settled claims in the current financial year. During 2023-24, EPFO settled 4.45 crore claims amounting to ₹1.82 lakh crore. In the current financial year, 3.83 crore claims have been settled for over ₹1.57 lakh crore, as informed by the CBT. In FY25, 1.15 crore claims have been processed in auto mode, where requests for withdrawals related to education, marriage, and medical purposes are settled automatically. Additionally, the auto claims settlement limit has been increased to ₹1 lakh from ₹50,000, now extended to advances for housing, marriage, and education as well.
The proposal to allow the withdrawal of PF claims through ATMs is still in the early stages. According to the Labour Ministry, this is merely an idea proposed by the Labour Minister, and much discussion is required between the Labour Ministry, EPFO, and the banking regulator before any implementation can take place. The objective is to simplify the claim settlement process, as high rejection rates have become a growing concern for individuals who rely on their EPF savings for post-retirement use or emergency funds.
However, the concept of allowing EPFO members to withdraw funds from ATMs will not materialize shortly. The ministry is focused on easing the claims process, but the idea requires approval from the Reserve Bank of India, the banking regulator before it can move forward. Additionally, there are several issues to address, such as the frequency and limits of withdrawals, which need careful consideration. The ministry is also exploring the possibility of a digital wallet system where claimed amounts could be stored and withdrawn, but all such initiatives depend heavily on strong support from the banking regulator and financial institutions.
The writer is a tax specialist, financial adviser, author, guest faculty and public speaker based in Goa. He can be reached at [email protected] or 9822983420
