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New Delhi: At least 500,000 account holders of retirement fund manager Employees Provident Fund Organization (EPFO) may have withdrawn in excess of what they had in their deposits, pointing to fraudulent transactions to the tune of 1,000 crore in these accounts.

The problem is much bigger than what the government auditor had found last month, according to the minutes of a review meeting of zonal employees provident fund officers with the central provident fund commissioner earlier this month.

The Comptroller and Auditor General (CAG) had said that about 70,000 provident fund accounts had negative balance, or withdrawals by members had exceeded the amounts deposited, as of 31 March 2012, and the amount involved was 45 crore.

“An analysis of the data available has revealed that more than 50% (or 500 crore) of the amount in negative balance pertains to just 15,000 member accounts," said the meeting record circular dated 20 March, a copy of which Mint has reviewed.

Some officials at the retirement fund manager, however, said that it could be more of an accounting problem than a case of fraud. The officials declined to be named.

A senior official at the labour ministry-controlled EPFO said efforts are on to audit and reconcile all these accounts. The central provident fund commissioner has asked all field offices to complete the process by the end of March.

“Though there is a belief that this might have surfaced due to some accounting mismatch but one cannot wish away fraud. Some account holders might have overdrawn as well," said the official, requesting anonymity.

The official said a case of fraud may tarnish the EPFO’s image at a time when the retirement fund manager is striving to become more user-friendly.

“It’s a concern," said K.K. Jalan, central provident fund commissioner. “We are trying to reconcile accounts and all these accounts will be reviewed by individual zonal offices in a time-bound manner. I believe it’s more of an accounting problem but at this stage you cannot wish away anything. There may be cases of fraud as well but we are yet to detect it."

The problem could be even bigger, said Gautam Bhardwaj, director of the Invest India Economic Foundation, a private think-tank that works in the field of retirement solutions. It could be cases of fraud—people illegally withdrawing money from PF accounts that had been inactive for some time, he said.

“If it is a matter of poor accounting, then the number of accounts (with negative balance) could be much more than 5 lakh," Bhardwaj said.

EPFO is yet to give individual permanent account numbers to its subscribers despite the technology being available, he said. “Once you give individual account numbers, consolidation of accounts will become easier and there will be less chance of any malpractice. The government should give EPFO a timeframe and insist they clean up the system."

There is a consensus to “immediately resolve the total number of members" on record, said the first official cited above.

There are “multiple figures of membership viz. the total member accounts are shown as 12.98 crores (129.8 million), ECR (electronic challan and membership receipt) membership is about 5 crores; currently contributing members are about 3 crores. Further there are about 15 crore members for whom data has been collected from EPF field offices," the meeting record states.

The retirement fund manager manages a corpus of more than 6 trillion. The annual provident fund accrual has risen 16.14% since the 2012-13 fiscal year.

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