EPFO to Automatically Refund Dormant Accounts Under ₹1,000

In a significant move to clear the massive backlog of unclaimed funds, the Ministry of Labour and Employment has approved a pilot EPFO project for the automatic refund of dormant Provident Fund (PF) accounts.

Announced on February 23, 2026, the initiative aims to return money to millions of subscribers without requiring any formal application or tedious paperwork.

Targeted Relief for Small Balances

The first phase of this reform targets “inoperative” accounts—defined as those with no transactions or contributions for at least 36 months—containing balances of ₹1,000 or less.

Data from the Employees’ Provident Fund Organisation (EPFO) reveals that there are approximately 31.86 lakh inoperative accounts holding a staggering ₹10,903 crore.

Within this pool, nearly 7.11 lakh accounts meet the sub-₹1,000 criteria.

These accounts collectively hold about ₹30.52 crore.

They will be the first to receive automatic transfers directly into bank accounts linked to the subscribers’ Universal Account Number.

Seamless Transfer Mechanism for EPFO

Under the new “zero-touch” process, the EPFO will bypass the traditional claim settlement procedure.

The EPFO will immediately process refunds for accounts that are already Aadhaar-seeded and have verified bank details.

For those with incomplete documentation, the ministry plans a phased approach to verify and settle dues.

The Ministry is designing the system to release the funds to the registered nominee or legal heir in cases where a subscriber has passed away.

This initiative is expected to drastically reduce the administrative burden on EPFO offices. It will also eliminate the “social stigma” of lost savings for low-wage workers.

A Pilot for Larger Reforms

Government officials indicate the mechanism will expand if the pilot project successfully clears the initial seven lakh accounts.

This expansion would cover the remaining 25 lakh inoperative accounts with higher balances.

This move is part of the broader “EPFO 3.0” strategy.

The initiative seeks to modernize the retirement fund body through AI-driven settlements and reduce claim processing times to under three days.

By unlocking these long-idle funds, the Ministry of Labour ensures that workers receive their hard-earned savings.

This initiative provides a much-needed liquidity boost to the bottom of the pyramid.

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