EPFO Eyes to Use Auto-Settlement to Clear ₹5,200 Crore from Dormant Accounts

The Employees’ Provident Fund Organisation (EPFO) is working on a new auto-settlement framework to enable seamless withdrawal of funds from inoperative accounts, aiming to reduce idle balances and simplify access for subscribers, as per The Times of India report. 

Large Pool of Unclaimed Funds Triggers Reform Push 

As of February 2026, inoperative EPFO accounts held unclaimed funds of approximately ₹10,181 crore across 31.8 lakh accounts.  

A significant portion of these accounts has remained inactive for extended periods, with nearly 7 lakh accounts being over 20 years old, while others fall across 10–20 year and 5–10 year categories. The accumulation of such balances has prompted efforts to streamline withdrawals. 

Auto-Settlement Mechanism to Simplify Withdrawals 

The proposed system will allow eligible subscribers to receive funds directly into their registered bank accounts without filing claims.  

In its initial phase, the mechanism is expected to cover around 8.1 lakh Aadhaar-verified accounts, where nearly ₹5,200 crore remains unclaimed.  

The objective is to eliminate procedural delays and make fund access more efficient. 

Pilot Phase Focused on Small Balance Accounts 

To test the framework, authorities have approved a pilot covering accounts with balances of up to ₹1,000.  

Under this phase, funds will be automatically credited, helping assess operational efficiency before scaling the system to higher-value accounts. Insights from the pilot are expected to shape the broader rollout strategy. 

A closer look at account balances shows varying levels of inactivity: around 14,000 accounts hold over ₹5 lakh each, while approximately 38,000 accounts fall in the ₹1 lakh–₹5 lakh range. 

Another 41,000 accounts have balances between ₹50,000 and ₹1 lakh, indicating that a substantial share of unclaimed funds is concentrated across mid-to-high value accounts. 

Priority and Eligibility Considerations 

The initial rollout is likely to prioritise Aadhaar-verified accounts, with additional focus on members who joined after October 2017.  

An EPFO account typically becomes inoperative when contributions stop for three years after retirement at 55, although accounts of younger members continue earning interest until the age of 58. 

Read More: EPFO Likely to Retain Provident Fund Interest at 8.25% for 2025–26! 

Conclusion 

The proposed auto-settlement mechanism marks a significant step towards modernising EPFO’s withdrawal process by reducing friction and unlocking idle funds. If implemented effectively, it could improve liquidity access for subscribers while addressing the long-standing issue of unclaimed balances in the system. 

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