RBI may soon oversee EPFO and Post Office Bank after Govt’s push for tighter scrutiny

In a significant move to strengthen oversight of public savings, the Central government is exploring bringing the Employees’ Provident Fund Organisation (EPFO) and the Post Office Savings Bank (POSB) under the supervision of the Reserve Bank of India (RBI) — a step that could reshape the governance of two of India’s largest custodians of household wealth.

According to official sources, the Government has written separately to the RBI seeking its supervisory intervention in both institutions. The move follows recent frauds, audit red flags, and calls from a parliamentary panel for tighter financial controls.

₹96-crore scam triggers alarm in postal savings

The proposal gained urgency after a ₹96-crore scam came to light in May 2024, exposing large-scale manipulation within the Post Office Savings Bank system. Over a two-year period, postal officials allegedly siphoned off public money through fraudulent alterations in the Sanchay Post database.

Audit reports revealed at least 60 such cases spread across 14 postal circles, citing “manual manipulation” and failure of internal checks. The Department of Posts has since approached the Department of Economic Affairs to formalize a memorandum of understanding (MoU) with the RBI for a review of its internal controls and operational systems.

An internal probe identified over 1,000 officials — including prime offenders, co-offenders, and supervisors — for disciplinary action, with nearly 985 employees already punished for lapses or complicity in fraud.

Labor Ministry seeks RBI’s guidance on EPFO

Separately, the Ministry of Labour and Employment had written to the RBI in February seeking advice on the EPFO’s fund management and investment practices. The central bank’s subsequent review flagged several systemic weaknesses, including conflicts of interest, opaque accounting, and flawed return-distribution methods that ignore accrued losses.

Following the RBI’s feedback, the EPFO’s Central Board has approved the formation of a joint committee with representatives from the RBI, the Finance Ministry, and the Labour Ministry to examine structural reforms. “The RBI acts as a super regulator. The idea is to bring that financial discipline and independence into EPFO’s operations,” an official said.

Central bank’s red flags and recommendations

The RBI has urged EPFO to separate its regulatory and fund management roles to avoid conflicts of interest, adopt mark-to-market accounting, and conduct actuarial assessments of liabilities and assets across all schemes. It has also advised a more diversified investment strategy — gradually increasing exposure to equities to boost returns while managing risk through strong controls and regular reviews.

Currently, the EPFO manages ₹26 lakh crore across more than 30 crore accounts, investing 45–65% in government bonds, 20–45% in corporate debt, and up to 15% in equities. The Department of Posts, meanwhile, oversees ₹12.56 lakh crore under POSB schemes with nearly 30 crore accounts.

Parliamentary panel pushes for RBI oversight

A parliamentary committee examining the postal savings system had earlier recommended periodic reviews by the RBI, citing the “large volume of transactions” and recurring cases of misappropriation. The Department of Posts has since maintained that while the India Post Payments Bank (regulated by RBI since 2022) handles the technology backbone, POSB’s legacy systems still require a thorough audit and modernisation under RBI’s watch.

While the Finance Ministry said it has yet to receive a formal proposal, the move signals a broader government effort to restore public trust in long-standing social security institutions that collectively manage nearly ₹40 lakh crore of citizens’ savings.