Employees’ Provident Fund Organisation (EPFO) is working on introducing an auto-settlement mechanism to facilitate seamless withdrawal of funds from inactive accounts, aiming to reduce unclaimed balances and improve ease of access for subscribers, according to The Times of India.
Rising Unclaimed Balances Drive Reform Initiative
As of February 2026, inoperative EPFO accounts collectively held approximately ₹10,181 crore across 31.8 lakh accounts. A substantial portion of these accounts has remained inactive for long durations, with nearly 7 lakh accounts lying dormant for over 20 years, while others fall within 5–20 year inactivity brackets.
The accumulation of such idle funds has prompted EPFO to explore more efficient mechanisms to enable withdrawals and reduce administrative bottlenecks.
Auto-Settlement to Streamline Fund Access
The proposed system is designed to automatically transfer eligible balances directly into subscribers’ registered bank accounts, eliminating the need for manual claim submissions.
In the initial phase, the framework is expected to cover around 8.1 lakh Aadhaar-verified accounts, unlocking nearly ₹5,200 crore in unclaimed funds. The move is aimed at reducing processing delays and enhancing overall operational efficiency.
Pilot Rollout Focused on Smaller Balances
To validate the system, EPFO will first implement a pilot program targeting accounts with balances of up to ₹1,000. This phased approach will help assess execution efficiency and identify operational challenges before scaling the solution to higher-value accounts.
Data indicates that while a large number of dormant accounts hold smaller balances, a meaningful share of unclaimed funds is concentrated in higher-value accounts. Around 14,000 accounts have balances exceeding ₹5 lakh, while approximately 38,000 accounts fall within the ₹1 lakh to ₹5 lakh range.
Eligibility and Priority Segments
The initial rollout is expected to prioritise Aadhaar-verified accounts, with additional focus on members who joined after October 2017.
Typically, an EPFO account is classified as inoperative if no contributions are made for three years after retirement at the age of 55. However, for members below this age, balances continue to earn interest until 58, even in the absence of fresh contributions.
Summary
EPFO is developing an auto-settlement system to enable direct withdrawal of funds from dormant accounts, potentially unlocking ₹5,200 crore in the initial phase. The move aims to simplify access, reduce unclaimed balances, and improve operational efficiency. A pilot program targeting small-balance accounts will precede a broader rollout, with Aadhaar-verified accounts likely to be prioritised.
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