COURTKUTCHEHRY SPECIAL ON PF AUTO REFUND RULES FOR SMALL AMOUNTS
EPFO to Auto-Refund Small Inoperative Accounts, ₹10,900 Crore Unclaimed Funds Highlight Urgent Reform
Pilot Scheme Targets 7 Lakh Accounts First
Why Clearing Dormant Balances Matters for Workers
By Legal Reporter
New Delhi: February 24, 2026:
The Employees’ Provident Fund Organisation (EPFO) has announced a major reform: inoperative accounts with balances up to ₹1,000 will be automatically settled and refunded to subscribers’ Aadhaar-linked bank accounts. This move, expected to benefit lakhs of workers, is part of a broader clean-up drive to address the growing problem of unclaimed provident fund deposits.
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According to official data, there are nearly 31.86 lakh inoperative accounts holding around ₹10,903 crore in unclaimed money. The pilot phase will cover about 7.11 lakh accounts, releasing nearly ₹30.52 crore back to subscribers or their nominees.
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What Are Inoperative Accounts?
An EPF account becomes inoperative if:
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- No contributions or transactions occur for three consecutive years.
- The subscriber has left employment but not withdrawn or transferred the balance.
- In cases where the subscriber has passed away, and nominees have not claimed the funds.
These dormant accounts accumulate over time, creating administrative burdens and locking away workers’ savings.
Why the Rule Change Was Needed
- Ease for Subscribers: Many workers, especially in the unorganized sector, lose track of small balances when changing jobs. Automatic refunds reduce paperwork.
- Administrative Efficiency: EPFO spends resources maintaining millions of inactive accounts. Clearing them improves efficiency.
- Transparency: Returning funds directly to Aadhaar-seeded accounts ensures accountability.
- Social Justice: Families of deceased workers will receive refunds without lengthy claim processes.
Scale of the Problem
- Total Inoperative Accounts: 31.86 lakh.
- Unclaimed Money: ₹10,903 crore.
- Pilot Refund: ₹30.52 crore across 7.11 lakh accounts.
- Future Plans: Expand automatic settlement to larger balances, potentially covering millions of subscribers.
How the Automatic Refund Works
- Accounts with balances up to ₹1,000 will be auto refunded.
- Money will be transferred to Aadhaar-linked bank accounts.
- If the subscriber has passed away, funds will go to nominees or legal heirs.
- No claim application or paperwork is required.
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Broader Reform Push
This initiative is part of EPFO 3.0, which aims to:
- Cut claim settlement time to under three days.
- Modernize member services with digital platforms.
- Reduce the backlog of pending claims.
Expert Views
Financial experts welcomed the move, noting that small balances often remain forgotten. They argue that automatic refunds will restore trust in the provident fund system and encourage workers to keep their accounts active.
Conclusion
The EPFO’s decision to automatically refund small balances in inoperative accounts is a landmark reform. It not only returns money to rightful owners but also addresses the larger issue of ₹10,900 crore lying unclaimed. By simplifying processes and leveraging Aadhaar-linked accounts, the government is taking a step toward efficiency, transparency, and worker welfare.
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