Government Moves to Place EPFO and POSB Under RBI Supervision

Government is paving the way for the Reserve Bank of India (RBI) to supervise the Employees' Provident Fund Organisation (EPFO) and Post Office Savings Bank (POSB), two giants managing trillions in public funds. Separate directives from the Ministries of Finance and Labour have urged RBI intervention, triggered by glaring frauds and operational gaps that threaten millions of savers. This supervisory pact could mark a seismic shift in oversight, positioning RBI as a "super regulator" for these critical institutions.

The nudge for POSB stems from a Rs 96 crore embezzlement scam uncovered in May 2024, where fraudsters siphoned public deposits over 24 months through manipulated schemes. An audit across 14 postal circles exposed 60 cases of misappropriation, including "manual alterations" to the Sanchay Post database and lapses in internal checks at head post offices. A parliamentary panel amplified the call, recommending an MoU with RBI for periodic reviews of controls to curb such breaches. The Department of Posts, already handing tech ops to the RBI-regulated India Post Payments Bank in 2022, now seeks broader RBI scrutiny of processes. With 29.29 crore accounts holding Rs 12.56 lakh crore as of 2021, POSB's vulnerabilities demand urgent fortification.

For EPFO, the Labour Ministry's February 2025 letter sought RBI's expertise on fund management, leading to a scathing report on conflicts of interest, flawed accounting, and investment risks. RBI flagged EPFO's dual role—regulating trusts while managing funds—as a red flag, urging separation of functions. It criticized the "held-to-maturity" approach that ignores market values, non-recognition of losses, and unscientific actuarial assessments. With Rs 26 lakh crore under management for 30 crore subscribers, EPFO's 15% equity cap on fresh funds was deemed too conservative; RBI advocates gradual diversification into equities for better returns, alongside phased risk controls. The EPFO Board has greenlit a tri-ministry committee with RBI input to implement these reforms.

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This dual oversight push underscores a systemic overhaul amid rising frauds—POSB disciplined 985 offenders in the 60 cases, while EPFO's anomalies risk eroding subscriber trust. Finance Ministry sources confirm no formal receipt of the POSB proposal yet, but momentum builds. As RBI's influence expands under the 2007 Payment and Settlement Systems Act, experts hail it as a safeguard for retail savers, potentially stabilizing yields and curbing losses. With EPFO streamlining withdrawals into three categories and eyeing portfolio managers, these changes could enhance efficiency, though implementation hurdles loom large in India's vast social security web.

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