RBI May Soon Oversee EPFO And Post Office Banks After Centre’s Push

The Reserve Bank of India (RBI) may soon start overseeing the two government organisations in social security – Post Office Savings Bank (POSB) and Employees’ Provident Fund Organisation (EPFO), according to a report of Indian Express. The government has reportedly written separately to the central bank for this supervisory intervention in both.

It came after a scam related to Post Office Savings Bank (POSB) surfaced indicating that a siphon off of Rs 96 crore of public money over a 24-month period up to May 2024 due to fraudulent activities in the operation of the Post Office Savings Bank. The Indian Express report added that the Department of Economic Affairs in the Ministry of Finance is seeking a supervisory oversight from RBI for undertaking

a review of internal controls.

On the other hand, the Ministry of Labour and Employment, sought RBI’s advice in February on fund management and investment practices of EPFO. The Ministry had asked the RBI to review systemic, policy, and capacity-related issues in EPFO’s fund management and investment framework. Following the review, the RBI submitted a report highlighting concerns over accounting practices and potential conflicts of interest in regulation.

The Indian Express report quoting an official said that the EPFO’s Board has now approved the formation of a committee with officials from the RBI, Finance Ministry, and Labour and Employment Ministry, with RBI as a super regulator.

The POSB has yet come under the the Payment and Settlement Systems Act, 2007, granting the RBI limited authority over payment functions. The government sought to expand the power to internal processes and risk controls.

The technology management of POSB operations has already been transferred to India Post Payments Bank, which is regulated by the RBI since August 2022.