‘Balanced move’: EPFO chief justifies new EPF withdrawal norms to protect retirement corpus

Amid mounting criticism over its revised withdrawal norms, the Employees’ Provident Fund Organisation (EPFO) has defended its decision to mandate that at least 25% of every member’s provident fund balance remain untouched until retirement. The organisation termed the move a “measured and forward-looking” step aimed at safeguarding long-term retirement savings while still allowing members partial access to funds during emergencies. 

EPFO chief and Central Provident Fund Commissioner Ramesh Krishnamurthi said the intent behind the move was to strike a balance between accessibility and financial discipline. “The idea was to make it easy for people to access their PF money when genuinely needed, but also protect their retirement corpus for long-term social security,” he told CNBC-TV18.

Future protection

Under the revised framework, members can now withdraw up to 75% of their EPF balance at any time for essential needs such as illness, education, housing, or other special circumstances. However, 25% of the corpus will remain locked as a mandatory retirement buffer, continuing to earn the standard 8.25% annual interest.

EPFO officials argue that this protection is necessary, as data shows a worrying trend—nearly half of all EPF members have less than ₹20,000 left in their accounts at the time of final settlement, and about 75% of contributors to the Employees’ Pension Scheme (EPS) exit within three years of joining. Frequent withdrawals, the EPFO says, undermine the purpose of long-term savings and weaken social security.

12-month waiting period

Among the most debated provisions is the new rule that permits full withdrawal of the provident fund balance only after 12 months of continuous unemployment, replacing the earlier two-month waiting period. Critics argue that this creates unnecessary hardship for workers who lose their jobs and may need immediate access to their funds to pay bills or EMIs.

EPFO officials, however, insist that the rule is not as restrictive as it appears. Partial withdrawals remain available even before completing one year of unemployment—for medical emergencies, education, marriage, or under a newly introduced “special circumstances” category that requires minimal documentation.

“The 12-month rule helps prevent premature exits from the system and preserves pension eligibility,” said Krishnamurthi, clarifying that if unemployment continues beyond a year, even the locked 25% becomes withdrawable.

Debate over the “protected balance”

The reform has sharply divided opinion. While some financial professionals view the 25% lock-in as a necessary safeguard that promotes saving discipline, others warn it could cause real hardship for those facing layoffs or medical crises. Critics say that in such cases, even 75% of one’s savings may not be sufficient to meet immediate needs.

Liquidity vs security

EPFO maintains that the restructured withdrawal system simplifies rules and strengthens long-term retirement readiness. Thirteen withdrawal categories have now been merged into three broader ones—essential needs, housing, and special circumstances—reducing paperwork and processing delays.

Ultimately, the debate centres on how best to balance liquidity with security. While the new framework aims to encourage financial prudence and ensure that savings continue to grow through compounding, critics fear it may restrict access during genuine hardship.

For now, EPF members can access up to 75% of their balance anytime without heavy documentation, but must wait a full year for total withdrawal. Whether this is seen as a step toward stronger social security or an unnecessary constraint will likely depend on which side of the paycheck—or layoff—one stands.