Besides curbing manipulation by unscrupulous companies, the move will eliminate the hassle of transferring funds to a new account number every time a person switches jobs and help accumulate EPF contributions for a longer time. A lot of manipulation has happened with companies not depositing money towards the PF contribution of their casual workers. The e-passbook scheme is a major reform as it brings transparency. The second step of reform will be making one account number permanentit will remain same even if an employee changes jobs, central provident fund commissioner RC Mishra told reporters.
It will be like the one in New Pension Scheme, he said. At present, EPF has close to 12 crore accounts of which 4.5 crore are operative, he said. This means many workers have neither transferred their funds from previous accounts to new accounts, nor made withdrawal claims.
Number portability is all the more necessary for contract workers, many of whom are not enrolled in the EPF due to the migratory nature of their jobs, Mishra said. For example, there are 4-5 crore construction workers not getting this (EPF) benefit.
At the end of March 2011, EPFO was managing a corpus of R4.66 lakh crore under three schemesemployees provident fund (EPF), employees pension scheme (EPS) and employees deposit-linked insurance (EDLI)for 6.16 crore subscribers. Despite enjoying a virtual monopoly, EPFO is now facing competition as investors are lured by higher returns offered by the New Pension System, banks and even post office schemes.
NPS is being increasingly preferred by corporates and new generation workers for its portability and tax benefits. Portability has helped employees to switch jobs and keep their retirement contributions intact while cutting down the compliance cost for companies.
The EPFO has been debating on the unique account number for quite some time. At one time, it wanted to make the Permanent Account Number (PAN) issued by the finance ministry as the unique number. But since many of the casual workers havent obtained PAN as their income was either lower or dwindling, Mishra said EPFO is now considering Aadhaar as the permanent EPF number.
Aadhaar has suddenly assumed greater importance as Prime Minister Manmohan Singh has announced a deadline of April 2014 for direct cash transfer of subsidies to the poor based on the Aadhaar platform developed by the Unique Identification Authority of India.
Singh has recently asked his senior ministers to roll out the aadhaar cards rapidly across the nation so that bank accounts can be opened based on that, and subsidies can be transferred directly to those accounts.
EPFO has taken a queue from the PMs ambitious plan and aligned its number portability plan to Aadhaar. Even in case of the e-passbook scheme, where subscribers of EPF can check their monthly and annual balance online, the Aadhaar card number is being accepted as one of the user identity. The other ID numbers that will be acceptable by EPFO are those given in PAN card, National Population Registrar, driving license, passport, voter ID and ration card. The e-passbook will accept ones mobile number as the password.
Though the e-passbook facility will not be available for exempted PFs and inoperative accounts initially, Mishra said the EPFO may ask exempted funds to develop similar facility within the next 6 months.