How much unclaimed money is lying with LIC and EPFO? Centre reveals latest figures

Published 2026-07-21 · Updated 2026-07-21 · 3 min · 531 words

UPSC CSE Context

Why in News: Centre reveals Rs 7,318.50 crore unclaimed with LIC and Rs 9,330.56 crore in EPFO inoperative accounts as of March 31, 2026. Syllabus Connection: Indian Economy: mobilization of resources, financial inclusion, social security schemes; Government policies and interventions for development. Exam Relevance: Relevant for questions on financial sector regulation, consumer protection, social security funds management, and government accountability. ## Core Issue Large unclaimed funds with LIC and EPFO raise concerns about policyholder/worker awareness and fund utilization. Key Development: LIC transfers unclaimed amounts over 10 years to Senior Citizens’ Welfare Fund; EPFO pilots auto-settlement for small inoperative accounts. Stakeholders:

• Policyholders
• EPF members
• Ministry of Finance
• Ministry of Labour and Employment
• IRDAI ## Static Knowledge High-Value Background:
• LIC was established in 1956 under the Life Insurance Corporation Act to provide affordable life insurance, especially in rural areas.
• EPFO, set up in 1952, administers provident fund, pension, and insurance for organized sector workers under the EPF Act. Concepts in Context:
• Inoperative EPF accounts: accounts where no contribution is made for 36 consecutive months under para 72(6) of EPF Scheme, 1952.
• Senior Citizens’ Welfare Fund (SCWF): fund managed by Ministry of Social Justice and Empowerment, receiving unclaimed amounts from insurers after 10 years. Institutions and Mechanisms:
• EPFO's auto-settlement pilot for Aadhaar-verified inoperative accounts with balances ≤ ₹1,000. ## Dynamic Analysis ### Governance
• Unclaimed funds indicate gaps in policyholder awareness and KYC updation, reflecting weak financial literacy.
• LIC's multi-channel tracing (agents, credit bureau, campaigns) shows proactive but still insufficient outreach.
• EPFO's classification of accounts as 'inoperative' rather than 'unclaimed' may obscure the scale of unclaimed dues.
• Auto-settlement pilot for small balances is a step towards reducing unclaimed amounts but limited in scope. ### Economy
• Large unclaimed sums represent idle capital that could otherwise be channeled into productive investments or social welfare.
• Transfer to SCWF ensures funds are used for senior citizen welfare, but raises questions about optimal utilization.
• EPFO's inoperative funds (₹9,330.56 crore) are not transferred to any welfare fund, remaining idle in EPFO accounts. ### Social Justice
• SCWF utilization for senior citizens aligns with welfare objectives, but lacks transparency on fund deployment.
• EPFO's lack of proposal to utilize inoperative funds for other purposes may miss opportunities for worker welfare. ## Mains Value Addition Arguments:
• Unclaimed funds highlight the need for stronger financial inclusion and consumer protection mechanisms.
• Proactive tracing by LIC and EPFO is commendable but must be scaled up with technology and awareness campaigns.
• Transfer to SCWF is a good practice but should be accompanied by transparent reporting on fund usage.
• EPFO's inoperative funds could be used for worker education or skill development if legally permitted. Examples:
• LIC's 'Your Money-Your Right' campaign (Oct-Dec 2025) involved 2,048 branches in district-level camps. Counterpoints:
• EPFO's auto-settlement pilot only covers balances ≤ ₹1,000, leaving larger amounts unresolved. ## Way Forward
• Enhance Aadhaar seeding and mobile number linking for all LIC policies and EPFO accounts to enable direct outreach.
• Expand EPFO auto-settlement to higher thresholds and integrate with DigiLocker for seamless claim processing.
• Mandate annual public disclosure of unclaimed funds utilization by SCWF and EPFO for transparency.
• Consider legislative amendment to allow EPFO to transfer long-inoperative funds to a dedicated worker welfare fund.

Primary/reference source: National Affairs