Unclaimed, Rs 22,636 crore in dormant provident fund accounts

MUMBAI: If you thought every rupee was valued in these days of rising prices, think again. A huge sum of Rs 22,636 crore is lying in inoperative accounts with the Employee Provident Fund Organization (EFPO).

These funds are linked to accounts that are lying dormant for more than 36 months and are earning no interest for their account holders. Largely, this is because employees holding these accounts have moved on to new jobs and have not transferred their EPF accounts to that of the new employment.

Earlier, even if an account was not active, interest at the applicable rate accrued on the funds lying in such accounts. (The interest rate fluctuates from year to year; for the current financial year, it will be 8.5 per cent.) However, owing to an amendment, which came into effect from April 1, 2011, no interest is credited to the account of an EPF member from the date on which it becomes an inoperative account.

As an inoperative account is defined as one in which no contribution has been made for at least 36 months, from the 37th month onwards no interest is credited by the EPFO against funds in such accounts. Maharashtra with a sum of Rs 7,427 crore lying in inoperative accounts tops this list, followed by Tamil Nadu and Andhra Pradesh with funds aggregating to Rs 2,433 crore and Rs 1,797 crore.

These details, based on the unaudited accounts of the EPFO for the year ended March 31, 2012, were made available to Parliament during the last winter session. In addition to this figure, several large corporate groups in India have their own provident fund trusts, which are not administered by the EPFO. Many such companies also admit to having inoperative accounts, even as they periodically follow up with their ex-employees or their legal heirs.

"On changing a job, the employee should file Form 13 with the new employer. On receipt of a complete and correct form by the EPF authorities, the funds ought to be transferred from the PF account maintained by the old employer to that of the new employer within thirty days. However, many employees fail to follow this process and over a period of time the EPF accounts set up while in their previous employment become inoperative," explains Yatin Pathak, a chartered accountant.

"A large chunk of these inoperative accounts have minuscule deposits of Rs 5,000 or less. Since the employee has already left that particular company, no administrative fee can even be collected from the company concerned. It is the EPFO which has to bear the administrative costs," states an official attached to the ministry of labour. This was perhaps one of the reasons for withdrawing the accrual of interest on inoperative accounts, he adds.

The mandate given to EPF offices across India is to clear applications for transfer within 30 days. However, HR practitioners admit that employees face delays and hassles in transferring their accounts.