K K Jalan,
Central Provident Fund Commissioner (F&A), Employees’ Provident Fund Organisation (EPFO), Ministry of Labour and Employment, Government of India
The Employees’ Provident Fund came into existence with the promulgation of the Employees’ Provident Funds Ordinance on the 15th November, 1951. It was replaced by the Employees’ Provident Funds Act, 1952. It is now referred as the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 which extends to the whole of Indian except Jammu and Kashmir. The Employees’ Provident Funds Bill was introduced in the Parliament as Bill Number 15 of the year 1952 as a Bill to provide for the institution of provident funds for employees in factories and other establishments.
The Payment System in India has undergone a sea change in the last few years and a number of initiatives have been undertaken to meet the requirements of the public at large. EPFO, one of the largest social security organisations in the world, has leveraged on the benefits emanating from technological developments in the banking sector and an in-house “New Application Software” to graduate to a greater adoption of electronic modes of payment for its provident fund subscribers and pensioners.
Switch to Electronic Format
In the last few years, EPFO has seamlessly switched over to electronic payment system over paper based system. During the current year, more than 92 percent of provident fund payments have been conducted through RBI’s National Electronic Fund Transfer (NEFT) system. Last year we had conducted 86 percent payment through NEFT. On an average nine lakh payments are made through NEFT per month by the organisation. It is important to note that in absolute terms, cheque volumes continue to be high in India at nearly 52 percent of total payment turnover, compared to eight percent of the total volume of provident fund payments through cheques. In the next few years as more and more branches of different banks are NEFT enabled, it would be possible for the EPFO to make nearly 100 percent payment through electronic means. Payment done through NEFT is fast and it ensures that cash is transferred directly into the accounts of the beneficiaries.
EPFO has also implemented pension payments through the Core Banking Solutions (CBS) of different banks like State Bank of India, Punjab National Bank and those in public and private sector by uploading the data of the pensioners to directly credit the pension on a real time basis in the beneficiary’s accounts in the paying branches. The pension payments are being effected for over 40 lakhs pensioners every month on the CBS platform created by the banks. An EPFO pensioner shall have a minimum of at least twelve e-transactions every year, which is well above the national average. Again, money is transferred directly into the accounts of beneficiaries on a real time basis at no cost to the pensioners. The adoption of electronic mode of payment has ensured timely payment of pension every month. The number of computerised branches of banks involved in disbursement of pension has nearly been one-third of all IT enabled branches in the country.
It has been a herculean task for the organisation to have collected CBS account numbers from banks and to have data entered anywhere between ten digits to seventeen digits numbers into our system. The same arrangement shall also be put in place in respect of a few thousand pensioners who have opted for payment through the post offices once the CBS platform is available by India Post by early next year. The advance payment of pension is now remitted to the bank a day before credit of pension on the last working day of the month through RTGS/NEFT. The adoption of such an electronic mode of transfer of money for disbursement of pension has cut down of float money available with the bankers and EPFO has been able to earn interest of up to ten days with the new arrangement in place. The un-disbursed amount is re-credited to the organisation’s pension account through NEFT/RTGS and is longer left idle with the banks.
Regional P F Commissioner (F&A), EPFO,
Ministry of Labour and Employment,
Government of India“Adoption of modern electronic payment system
by the EPFO has brought financial inclusion to all
strata of society”
Efficiency and Transparency
The entire exercise of making online payments has been a low cost affair for the organisation. The cost incurred towards printing of bulky monthly pension statement has given way to preparation of a soft copy. This has been a major cost savings as part of the “Green Initiative” undertaken by the organisation. It has been estimated that the expenditure incurred in roll out of computerisation programme would be recouped by the organisation in a span of four years on account of savings in payments through NEFT instead of the existing practice of sending cheques by speed post. A single cheque is now printed for multiple payments through NEFT/CBS. The forwarding of cheques to banks and beneficiaries has been replaced by SMSs at different stages in settlement of claims. Any grievance arising out of cheques missing in transit and postal delays have given way to enhancement in customer’s satisfaction by efficient credit of payments through the electronic mode. It has been a conscious endeavour of the organisation to train human resources as an essential ingredient to man, run and supervise a safe and efficient electronic payment system.
There has been a faster reconciliation of payments at the end of EPFO and the banks’ and this in turn has facilitated faster service charge payments to the bankers.
The adoption of modern electronic payment system by the EPFO has brought financial inclusion to all strata of society. EPFO has been able to foster financial inclusion to much of rural India by extending the benefits of e-payments. The e-payments which have been adopted for provident fund subscribers and pensioners have been safe, simple and at no cost to the beneficiaries. The electronic transactions effected for the beneficiaries have witnessed a huge exponential rise in volume in the last few years. The adoption of electronic system of payment through the RBI operated NEFT and intra bank payment through the Core Banking Solutions of different banks has been a “win-win” situation for all stake holders – EPFO’s provident fund subscribers/pensioners, the organization itself and the banks. The success of adoption of electronic payment system by EPFO depends in nearly 50 lakhs payments every month and as a measure of financial inclusiveness of all sections of the society.