Post Office Savings Bank (POSB) and Employees’ Provident Fund Organization (EPFO), two state-owned organizations vital to India’s social safety net, may fall under the purview of the Reserve Bank of India. The government has written separately to the nation’s top banking regulator, requesting a supervisory intervention in both.
Regarding the Department of Posts, the letter was sent in response to a scam in which Rs 96 crore in public funds were embezzled during a 24-month period ending in May 2024 as a result of dishonest practices in the Post Office Savings Bank programs. After that, it contacted the Ministry of Finance’s Department of Economic Affairs to get a supervisory agreement with the RBI so that it could conduct an internal control assessment.
In February of this year, the Ministry of Labour and Employment wrote to the RBI to request guidance on matters concerning EPFO’s investment and fund management procedures. The RBI provided a report highlighting issues such accounting procedures and the conflict of interest as a regulator after the Ministry asked it to look into structural, policy, and capacity-related issues within EPFO’s fund management and investment framework.
The creation of a committee comprising representatives from the RBI, Finance Ministry, and Labour and Employment Ministry has now been approved by the EPFO Board. As a super regulator, the RBI operates. The purpose of contacting them was to ask for advice regarding EPFO’s operations, according to an official.
Operating as an agency governed by the Payment and Settlement Systems Act of 2007, the POSB was formerly under the jurisdiction of the Ministry of Finance. Since the Bank’s payment-related operations are covered under the 2007 Act, the RBI already has control over them.
The Department of Posts has insisted that India Post Payment Bank, which is subject to RBI regulation, has taken over technology management of POSB operations as of August 2022. “A review of the internal processes” is the goal of the POSB’s proposed new MOU with RBI.
The Sanchay Post database had been “manually manipulated or altered” by officials, according to audit findings. The fresh RBI intervention request has been attributed to the head post offices’ inability to establish internal controls to stop fraudulent activity in the operation of Post Office Saving Bank Schemes.
The “large volume of transactions involved in the POSB” and the RBI’s oversight of reviewing “the internal controls and checks” that must be put in place at specified intervals to stop fraudulent activities in the Post Office Savings Bank’s operations served as additional impetus for the action.
The poor management of postal circles had been brought to light by an internal audit study. Following the audit report, on May 2, 2024, specifics of the sanctions imposed on Department personnel who were accused of failing to guarantee the implementation of internal checks in these situations were disclosed.
A total of 108 prime criminals, 46 co-offenders, and 1,018 subsidiary offenders were among the alleged perpetrators in these 60 fraud cases that were recognized for disciplinary action.
It was estimated that 718 offenders were the targets of finished action. There were 187 offenders against whom action could not be taken because of their retirement or death, compared to 267 offenders against whom action had been started.
There are several overlaps in these figures. In its submission to the Parliamentary panel, the Department of Posts stated that 985 accused offenders “who had committed fraud and sub offenders who had failed to ensure implementation of the internal checks codified for preventing fraudulent activities in operation of POSB schemes” had received harsh punishments.
