The Government is considering divesting the Employees’ Provident Fund Organisation (EPFO) of its regulatory role and vesting such functions with a separate entity. The reason behind proposal is to avoid conflict of interest, since EPFO is both India’s largest provident fund (PF) provider and a regulator.- Financial Express
Labour Ministry has already started working on the proposed bifurcation following a suggestion from the finance ministry. However, any changes in the existing provisions require Parliament approval.
Presently, EPFO acts as an enforcement agency to oversee implementation of Employees Provident Fund & Miscellaneous Provisions Act, 1952, and as a service provider for around six crore covered beneficiaries throughout the country.
At the same time EPFO also enjoys punity powers over the firms that don’t comply with the Act. Arguing that EPFO’s dual role causes conflict of interest. Thus the finance ministry suggested that the bifurcation process should be carried out after identifying and separating the activities those are regulatory in nature and those of a PF provider within the EPFO.
The department of financial services also expressed the view that there was a need to regulate the unregulated provident fund trusts, as good governance can optimise pension outcomes for subscribers of a provident fund trust.
A consensus needs to be built across various government departments on making the EPFO the regulator for all provident funds, including the exempted and excluded categories, sources told the paper.
A standing committee, in a report to the Lok Sabha, had expressed the need to create a regulatory mechanism for all PF trusts.