Two government-run institutions important for India’s social security system — the Post Office Savings Bank (POSB) and the Employees’ Provident Fund Organisation (EPFO) — may soon come under the supervision of the Reserve Bank of India (RBI). The government has written to the RBI, asking for its oversight on both.
In the case of the Department of Posts, this step comes after a scam where about ₹96 crore of public money was siphoned off over 24 months till May 2024 due to fraud in Post Office Savings Bank schemes. After this, the Department of Posts reached out to the Department of Economic Affairs under the Ministry of Finance to seek a supervisory agreement with the RBI for reviewing internal controls, sources told The Indian Express.
RBI Advisory for EPFO
The Ministry of Labour and Employment wrote to the Reserve Bank of India (RBI) in February this year. It asked for advice on fund management and investment practices of the Employees’ Provident Fund Organisation (EPFO). The Ministry requested the RBI to examine policy, system, and capacity-related issues in EPFO’s fund management. Later, the RBI submitted a report highlighting problems such as accounting issues and conflict of interest.
The EPFO Board has approved forming a committee with officials from the RBI, Finance Ministry, and Labour Ministry. An official said, “The RBI works as a super regulator. We approached them for guidance on EPFO operations.”
RBI Supervision for Post Office Savings Bank
The Post Office Savings Bank (POSB) is under the Ministry of Finance and works under the Payment and Settlement Systems Act, 2007. Because of this, the RBI already supervises its payment functions.
The Department of Posts said that technology management of POSB operations was handed over to India Post Payments Bank in August 2022, which is regulated by the RBI. The new MoU proposal with the RBI is meant to review internal processes.
Fraud Cases in POSB
An audit last year found about 60 cases of misuse of public money in post offices across 14 postal circles. Reports showed manual changes in the Sanchay Post database by officials. The failure of head post offices to follow internal checks was a major reason for asking RBI’s help.
A Parliamentary panel also suggested RBI supervision because POSB handles a large number of transactions. The recommendation for an MoU with RBI was sent to the Department of Economic Affairs for guidance.
Disciplinary Action
On May 2, 2024, the Department of Posts listed actions taken against officials. In the 60 fraud cases, 108 prime offenders, 46 co-offenders, and 1,018 sub-offenders were identified. Action was completed against 718, ongoing for 267, and could not be taken for 187 due to death or retirement. In total, about 985 people were punished for fraud or failing to follow internal checks.
Assets Under Management
Both POSB and EPFO manage large sums of public money. The EPFO handles ₹26 lakh crore for over 30 crore account holders. The Department of Posts has more than 29 crore POSB accounts with deposits worth ₹12.56 lakh crore as of December 2021.
RBI Recommendations for EPFO
The RBI suggested separating regulatory and fund management roles to avoid conflict of interest. It flagged problems in return distribution, saying it does not include losses or follow market value. EPFO treats all assets as “held-to-maturity.”
The RBI also advised a detailed study of assets versus liabilities for all schemes. It suggested gradually increasing investments in equities and other assets to improve returns and reduce risk. Currently, EPFO invests 45–65% in government bonds, 20–45% in corporate debt, and up to 15% in equities.