As India continues to struggle to contain the number of coronavirus cases daily, its economic impact looks dangerous. Since the start of April, the subscribers of Employee Provident Fund Organisation (EPFO) has withdrawn more than Rs 30,000 crore. The amount holds significance due to a high number of unemployment in the country. Notably, EPFO looks after Rs 10 lakh crore built on mandatory contributions from nearly 60 million salaried people and their employers.
Withdrawal more than usual: EPFO officials
As per a report published in financial daily the Economic Times, the amount that has been withdrawn between April and the third week of July is much more than the withdrawal EPFO witnesses over similar periods. EPFO further attributed such high withdrawal to pandemic-related job losses, salary cuts, and medical expenses.
As per an EPFO official, "Of the total withdrawals, nearly 3 million beneficiaries withdrew upwards of Rs 8,000 crore under the COVID window while the rest Rs 22,000 crore was a general withdrawal by 5 million EPFO subscribers, mainly as medical advance." Finance Minister Nirmala Sitharaman had announced a special COVID window for withdrawals shortly after India declared a national shutdown to curb the spread of the pandemic in late March. The fund body's Capital Management and Audit Committee (FIAC) briefed its members on withdrawals at a virtual meeting conducted last week.
Officials said after "detailed micro-level review" the full effect of this broad withdrawal would be understood. "With the increase in COVID's cases, the number of withdrawals is growing higher," said a top official in the department. In line with the latest trend, EPFO estimates that nearly 10 million would withdraw from their saving in the coming days.
As reported last month, Employees' Provident Fund Organization (EPFO) can lower its 60 million subscribers' retirement savings payout due to diminishing return on equity and weak cash flow, reducing the 8.5 percent interest rate announced for FY20. Lockdown due to COVID-19 has increased the employment levels in India multi-fold.