EPFO ties up with banks to expand offerings, reduce transaction costs
New Delhi: Retirement fund manager Employees Provident Fund Organisation (EPFO) Wednesday joined hands with a group of banks including ICICI Bank and Kotak Mahindra Bank in a move to expand its service offerings and reduce transaction cost by at least Rs300 crore a year.
On the one hand, the move will help EPFO become more customer friendly by allowing employers and employees to remit and receive provident fund contributions/withdrawals and pension claims from a number of banks, on the other, it would help the organisation save Rs300 crore a year in transaction expenses.
“This is a win-win for banks and for us in EPFO,” labour minister Bandaru Dattatreya said. “The banks have agreed to offer zero cost transactions helping us save money,” said the minister, who also heads the EPFO central board.
For 60 years, State Bank of India was EPFO’s sole banking partner. In December 2016, EPFO roped in four more nationalized banks: Punjab National Bank, Allahabad Bank, Union Bank and Indian Bank. On Wednesday EPFO tied up with five more —ICICI, Kotak, HDFC Bank, Bank of Baroda and Axis Bank.
“Yearly, we spend around Rs350 crore in terms of transaction charges. With 10 banks in our fold, it will reduce our cost by Rs300 crore,” central PF commissioner V.P. Joy said on the sidelines of the agreement signing event.
EPFO has now asked seven more banks—IDBI Bank, Canara Bank, Indian Overseas Bank, Bank of India, Bank of Maharashtra, Central Bank and Corporation Bank—to come on board. Once these banks join in, the EPFO will save another RsRs40-Rs45 crore a year, lowering its annual transaction cost to less than Rs10 crore from nearly Rs350 crore a year.
Dattatreya said the zero cost transaction service provided by banks may also reduce the administrative cost of EPFO, which would mean lower expenses for employers in dealing with the retirement fund manager. EPFO charges 0.65% from employers as administrative cost for managing employees’ PF corpus.
So why are banks providing free service to EPFO?
“Its about service delivery to improve customer stickiness,” said Raghavendra Singh, executive vice-president (public affairs and government business) at Kotak Mahindra Bank. “If our customer can pay telephone bill through us why can’t he or she pay EPF contributions. It will help us increase our product basket as well as help grow our customer base,” said Singh.
An EPFO official, who requested anonymity, said banks will also be able to use EPF remittances for the short-term, from where they will derive the benefit. As per the terms of the agreement, banks will remit EPF deposits to EPFO on the next working day, largely by 11am.