Soon, no need for nod to withdraw PF cash during emergencies

New Delhi Subscribers of the Employees’ Provident Fund Organisation (EPFO), the State-backed retirement fund manager, may soon not require approvals before withdrawing money from their accounts during financial emergencies, a senior official said, asking not to be named.

The labour ministry is in the process of modifying rules to allow members to directly take out cash through special ATMs for the purpose through a self-approval process -- a move aimed at cutting down cumbersome processes, the official said. Documents required to avail of such partial withdrawals will have to be digitally uploaded.

However, the current limits of partial withdrawal of funds and conditions will continue to apply, the official said, adding that discussions with the Reserve Bank of India (RBI) are underway to facilitate the change.

Employees cannot withdraw their savings while still in employment but there are exemptions for personal emergencies.

“Our ministry’s aim is that an EPFO member should be able to access his or her own money without any difficulty. For this, the ministry is undertaking a series of reforms,” Union labour and employment minister Mansukh Mandaviya said last month.

According to changes being worked on, a member can self-approve his or her claim for emergency withdrawal within permissible limits. “The idea is to quicken the process with minimum human intervention,” the official cited above said.

The conditions for partial withdrawal of PF amounts include wedding, medical expenditures, home loan repayments, education needs, and renovation or construction of a house. A member can also withdraw entirely from the fund if they have been out of employment for two months in a row since the last job.

These conditions will continue to apply, the official said.

For instance, members can pay off home loans by withdrawing up to 90% of their provident fund corpus if the house is registered in their name or held jointly with others, provided he or she has completed three years of service. For medical exigencies, a member can withdraw either their total PF contribution with interest or up to six times their monthly salary, whichever is less.

EPFO savings are a critical source of social security for employees. An employer and worker both are required by law to contribute 12% of a person’s basic salary towards a corpus managed by the EPFO.

The savings interest rate offered by EPFO, at 8.25% for FY24, is a widely watched metric of the salaried middle-class.

The total corpus of the EPFO, which has nearly 70-million members, during FY24 was about ₹25 lakh crore. The fund typically invests in government securities, bonds and exchange traded funds, which are pooled investment instruments that can be bought and sold like an individual stock.

Currently, emergency withdrawal of PF requires members to make an application in a prescribed format, known as form 31.

An applicant needs to also submit a declaration under rules prescribed in para 68 of the EPF Scheme 1952.

These steps are mandatory but physical submissions, validation and approval processes may require anywhere between 20 days to 40 days. It further takes at least a week for the amount to be credited to a bank account.

In many instances, delays arise, in which case an applicant can file a complaint.

With auto-approval and a completely digitised process, as is being planned, the aim is to facilitate withdrawals within 48 to 72 hours, depending on the purpose of withdrawal, the official added.

The labour ministry is working with the central bank to enable direct access to savings deposits through ATMs and e-wallets linked to provident fund accounts, the official said.

Currently, only in cases of auto settlement of claims does the money go directly to the bank account of a subscriber, which can be then withdrawn from teller machines.

As part of reforms already completed, EPFO last month switched over to a centralised pension payments system (CPPS) under employees’ pension scheme.

This enables pensioners to access their pension from any bank, any branch and any location in the country. It eliminates the need for physical verification visits and simplifies the pension disbursement process.

Members can now access their provident fund documents in Digilocker, a state-backed cloud-storage app, and file claims through the government’s Umang app. Pensioners can now upload life certificates digitally, which are required to be submitted to banks annually, to continue receiving benefits.