Indian Banks & Financial System

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arvin
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Re: Indian Banks & Financial System

Post by arvin »

From economics thread, there was a post by me last week on EPFO, based on article by finance writer Monika HAlan
Thanks vijayk for the article by Monika Halan.
Most apt is the description of EPFO as an organisation that is opaque and scores low on metrics of transparency.
It is a ticking time bomb since it is sitting on a large pool of money, is not a bank and not under RBI.
Never understood why just for an account (8.5 % interest) it exists as an seperate organisation, unlike PPF (interest 7.1 %) which is also an account but exists only as a lines of code in server and physically serviced by regular banking employees who also do other banking work.
viewtopic.php?f=2&t=7613&start=7080

True to its opaque nature, it seems there was a multi-crore PF scam brewing involving PF settlement of Jet Airways employees.

https://www.aviationindia.net/2022/08/b ... t_837.html
Mumbai: The Kandivli Provident Fund (PF) office is under the cloud of a multi-crore scam involving the PF settlement of several Jet Airways employees, mostly pilots. Sources have told mid-day that PF officials connived with the airline staff to siphon money off the accounts of foreign workers and destroyed vital documents. Amid demands for a CBI probe and with the EPFO sending a senior vigilance officer to Mumbai to investigate the scam, desperate efforts are being made to retrieve copies of the documents.

As pressure mounts for a forensic audit into the PF accounts of expatriate and domestic workers of Jet Airways, the Kandivli PF office suspended a senior official—Social Security Assistant Machindra Bamne—on August 18 for allegedly receiving kickbacks.
Looks like there are no checks and balances in place and for an organisation this big, there hardly seems to be fraud detection software in place.
Needless wasting of subscribers time and mental peace dealing with such kind of blackholes which need not physically exist in first place.
If this is the case of one PF office in financial capital, one can only imagine how hundreds of PF office all over India are functioning.
Physical EPFO office made sense in an era when cash was king and there was no digital transfer. In this age it hardly makes sense.
EPF can follow the same model of NPS where banks use professional fund managers to get market linked returns.
arvin
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Re: Indian Banks & Financial System

Post by arvin »

So the EPFO scam size at its Mumbai Suburban office is touching only Rs 1000 crore.

https://www.moneycontrol.com/news/busin ... 72481.html
Employees' Provident Fund Organisation (EPFO) has opened an investigation into potential fraud by its staff at a suburban Mumbai office that may have resulted in losses of up to Rs 1,000 crore for the retirement fund body, The Economic Times has reported.

The alleged fraud involved opening bogus accounts, transferring money, or resolving disputes with bankrupt businesses such as former Jet Airways, which afterwards applied to the National Company Law Tribunal (NCLT) for an ownership change, the report cites sources as saying.
JTull
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Re: Indian Banks & Financial System

Post by JTull »

This scam is good. Not too big. Reforms will follow.
arvin
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Re: Indian Banks & Financial System

Post by arvin »

Instead of reforms just disband EPFO and either merge it with NPS or make it another banking service like PPF.
The organisation is beyond redemption and is the financial equivalent of erstwhile OFB factories which were only corporatised recently.

This is the second time in less than a year the same EPFO branch in Kandivali suburb of Mumbai has come under scanner.
Last year in August 2021 there was another scam in which 21 crores were siphoned off.

From August last year.
https://indianexpress.com/article/india ... e-7457061/
BETWEEN MARCH 2020 and June 2021, when the focus of an entire nation was on the surging pandemic and the crippling lockdowns, a nexus of employees at a Mumbai office of the Employees Provident Fund Organisation (EPFO) allegedly siphoned over Rs 21 crore from a common PF pool through fraudulent withdrawals, according to details of an ongoing internal investigation accessed by The Indian Express.

So far, the probe has found that the “mastermind” of the scam is Chandan Kumar Sinha, a 37-year-old clerk at the EPFO’s Kandivali office, who allegedly used as many as 817 bank accounts of mostly migrant workers to fraudulently claim PF totalling Rs 21.5 crore on their behalf and deposit it in their accounts.
In any half decent organisation, IT password sharing is a serious offence. But not here.
And, they exploited key loopholes in the system using passwords given to them by superior officers who opted to stay at home during the lockdown. For instance, their PF claims were in the range of Rs 1 lakh-Rs 3 lakh — withdrawals above Rs 5 lakh are flagged by the system and only approved after a second verification done by a senior officer.

“The probe has found that a few section officers at the branch actively helped Sinha siphon funds. It is a bit embarrassing that some of our officials gave their passwords to him and did not bother to change it later. This is negligence,” said another senior official.
In Jan this year CBI booked 8 EPFO employees.
https://indianexpress.com/article/citie ... d-7734228/
The Central Bureau of Investigation (CBI) has booked eight employees posted at a Mumbai office of the Employees’ Provident Fund Organization (EPFO) for allegedly siphoning Rs 18.97 crore from a common PF pool through fraudulent withdrawals.

As per the CBI FIR, the eight accused include the mastermind of the fraud, Chandan Kumar Sinha, a clerk at the Kandivali office of EPFO; and his seniors Abhijeet Onekar, Shiva Sankhar Mamadi, Uttam Tagaray, Vijay Jarpe, Dilip Rathod, Ganesh Ghaywat and Seema Bankar, all employees of EPFO at the same branch.
Despite the scam last year it appears there are no lessons learnt, with the result that this year another scam involving Jet airways employees has come to light.
vera_k
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Re: Indian Banks & Financial System

Post by vera_k »

Now that PAN and AADHAR have been linked, EPFO must be required to make account and balance details available to all Aadhar enrollees based on their PAN data. I suspect many more such scams will come to light when that is done.
nandakumar
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Re: Indian Banks & Financial System

Post by nandakumar »

vera_k wrote:Now that PAN and AADHAR have been linked, EPFO must be required to make account and balance details available to all Aadhar enrollees based on their PAN data. I suspect many more such scams will come to light when that is done.
Basically, investment operations and depository functions shouldn't be under one roof. It leads to fraud.
arvin
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Re: Indian Banks & Financial System

Post by arvin »

Dusshera is over, but no sign of EPFO interest for 2021-2022

Interest for previous year yet to be credited by EPFO. Maybe looking for oppurtune planetary alignment to decide credit date.
Despite the AUM of ₹15690 billion (over $209 billion) and slick brochures not withstanding, it seriously falls short in terms of customer services it offers.

From the first link above,
Over the years, there has been a persistently long time lag between the time EPFO's Board of Trustees decides on the rate of interest for the financial year and the time the interest actually gets credited to the accounts of the members.

Take the 2020-21 interest cycle. The interest of 8.5 percent was decided by the EPFO’s Board of Trustees in March 2021. This was notified by the EPFO to members by a circular in October 2021. But the interest rate was credited in December 2021.

The gap between March and December was nearly nine months, an extraordinary delay.

Earlier this year, it was reported that interest for 2021-22 was supposed to be credited by July 2022, still a gap of about four months.

The root cause of the delay is that the EPFO has not followed the global norm of paying interest to members on the basis of its market-related earnings. Instead, the EPFO has relied on the administered rate of interest, exemplified by declaring interest rate in March, which is before the end of the financial year.

This reliance has meant that the EPFO, even after 70 years of operations, does not have an in-house investment team which can act as a check on mandates to the external fund managers.
In contrast to this, PPF which is offered by Banks credits its interest on time on April 1st every year.
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