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Showing posts with label 70%/30%. Show all posts
Showing posts with label 70%/30%. Show all posts

Monday, May 3, 2010

EPFO and NPS – Competition better for the customers


EPFO and NPS – Competition better for the customers.

What is EPFO ?

EPFO stands for Employee Provident Fund Organisation.
The Employees' Provident Fund, India Head office is at
                                                                            
Location               :      14, Bhikaiji Cama Place,
                                       Bhavishya Nidhi Bhawan,
                                       New Delhi-110 066
                                       India

e-mail                     :    cpfc@epfindia.gov.in


The Constitution of India under "Directive Principles of State Policy" provides that the
State shall within the limits of its economic capacity make effective provision
  • for securing the right to work,
  • to education
  • and to public assistance in cases
    1. of unemployment,
    2. old-age,
    3. sickness &
    4. disablement and undeserved want.

The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 14th  March,1952.

A series of legislative interventions were made in this direction, including the Employees' Provident Funds & Miscellaneous Provisions Act, 1952. 

The Employees' Provident Fund Organisation, India, is one of the largest provident fund institutions in the world in terms of members and volume of financial transactions that it has been carrying on.

Extracted from the Website of EPFO




Main features of the New Pension System: -


Main Features and Architecture of the New Pension System


  • The new pension system would be based on defined contributions. It will use the existing network of bank branches and post offices etc. to collect contributions. There will be seamless transfer of accumulations in case of change of employment and/or location. It will also offer a basket of investment choices and Fund managers. The new pension system will be voluntary.


Extracted from the PFRDA Website.

          Recent news articles have pointed out that due to increased competition from NPS (National Pension Scheme), EPFO is in the process of transforming its customer service department.

The main features in its proposed customer service initiatives are

01)   Updating the Mobile numbers of its subscribers. This will enable EPFO to inform its subscribers of any important changes pertaining to their account. The most important being the credit of their PF amount to their Bank Account.

The next and most electrifying initiative is to gradually move to NEFT (National Electronic Funds Transfer) for its payments to its account holders, instead of the old fashioned paper cheques.

As of 26/04/2010, 95 Banks with their 67,354/- branches are part of the NEFT network.
This constitutes 95% of Indian Bank Branches, excluding the Co-operative Banks and Regional Rural Banks. So a large majority of the EPFO customer’s Bank accounts are under the ambit of the NEFT.

This is stimulating news for the growth of Volumes of NEFT and is an important step for achieving the 70%-30% dream of NPCI in the Indian Retail Payments scenario.

I foresee the following benefits that EPFO and the Indian Banking System, will accrue on switching over from the paper based cheques to NEFT

01) Faster delivery of the customer’s funds to their respective bank accounts.
02)                       Faster reconcialtion of transactions, as the NEFT transactions have to be credited at T+2 Batch settlement or Returned to the Beneficiary.
03)                       Reduced carbon print due to the reduction in paper cheques.
04)                       Huge spurt of NEFT Volumes.
05)                       New converts to ePayments, as the EPFO employees and EPFO account holders will be familiar with the benefits of NEFT.




The below table highlights the number of member claims settled by EPFO.


MEMBERS CLAIMS SETTLED
2006-07
2007-08
2008-09
No. of Claims ( In Lakhs)
No. of Claims ( In Lakhs)
No. of Claims
(In lakhs)
Provident Fund Claims
25.76
29.30
34.73
Partial Withdrawal/ Advances
3.59
3.33
3.22
Transfer Cases
2.16
2.30
2.80
Monthly Pension Claims (MPC)
3.63
3.54
4.10
Employees' Pension Claims (all other benefits)
19.29
20.95
26.59
E.D.L.I Claims
0.20
0.21
0.20
Total
51.00
56.09
71.64



This means 70lacs + transactions can immediately be part of the NEFT Cycle.
It can be observed that the number of claims settler every year is on the increase.


However, for this customer service initiative to be successful, EPFO should initially do a mass cleaning up exercise.
After the initial exercise, it is better the cycle be followed every six months or at least yearly, to shave its customer’s bank account numbers up to date.

Currently the EPFO has 5 crores subscribers spread over all over India.
As this number is very large, EPFO can concentrate on the 10 cities to clean up the Bank Account Numbers and gradually cover all its subscribers.
I suggest the following process flow:

01) Collate the Top 10 cites EPFO subscribers list.
02)                        Write to them, that EPFO is switching over to NEFT and hence request for the Bank Account numbers along with the IFS Codes.
03)                       Once 80% + of the subscribers respond, initiate a Re1/- dummy transaction, to the subscribers accounts through the NEFT.
04)                       In case of success, update appropriately in the EPFO software package.
05)                       In case of failure, inform the subscriber accordingly.

This exercise to be repeated every year.

OR,
If the above is cumbersome and costly, another option is

01) Compile the Subscribers list Bank Wise.
02)                       Filter the list to only NEFT Participant Banks.
03)                       Prepare individual bank list with complete particulars.
04)                       Forward the list to the respective controlling Bank office, with a request to inform the valid account numbers and also their respective IFS Codes.
05)                       Follow up only with those subscribers, whose bank accounts are invalid.

The above is a more simple way.



Last not but the least, the switching over from physical cheques to NEFT, is a golden opportunity for IT   Companies to be part of a major IT project.

Monday, February 1, 2010

The 70%/30% Vision Document-Part 1

The 70%/30% Vision Document-Part 1

Part 1:-
Is the 70% Electronic-30%Paper a realistic target ?
          Today I am starting a new series of Posts. The Series Title is the “The 70%/30% Vision Document”

 This is in line with the Vision of  Shri.Hota, CEO of NPCI National Payments Corporation of India.

In this Series, I would be concentrating as to what marketing methodologies can be adapted to convert India’s Current Payment Ratio of 30% Electronic-70%Paper to 70% Electronic-30%Paper in the next 5 years.

First of all, is the 70% Electronic-30%Paper a realistic target?
Yes, in my opinion this is a realistic target. This is within the availability of resources in our country, within the knowledge in our country and within a time-frame of 5 years.

What do electronic payments constitute?
Electronic Payments means movements of funds via Real Time Gross Settlement (RTGS)/National Electronic Funds Transfer (NEFT)/Electronic Clearing Service (ECS)-both Credit and Debit Variants/ATM’s.

Mobile Banking/Internet Banking can also be an indirect part of Electronic Payments, though funds transfer within Banks will again be a part of RTGS/NEFT.


Payment System, can said to be supporting system for  transfer of funds from suppliers (savers) to the users (borrowers), and from payers to the payees, usually through exchange of debits and credits among financial institutions.

It consists of a paper-based mechanism for handling checks and drafts, and a paperless mechanism (such as electronics funds transfer) for handling electronic commerce transactions.

As long as the human society survives, the need for a Payment System will be there.

To achieve any objective a mix of persuasion and official directions are necessary.
When persuasion fails than official directions might do the trick.


Apart from Individuals, who are the main components of the Payment System i.e who order funds to be transferred from one Bank Account to another Bank Account.
I will divide this into 2 parts i.e The Receiving part and the Giving part.
GIVING PART:_
01)  The Banks themselves.
02) Mutual Funds.
03) Insurance Companies.
04) All Salary Disbursements whether Government or private.
05) Telecom Companies.
06) Dividend Payouts by Public Companies.
07) Media Houses.
08) Finance Companies.


Receiving Part:-
01)  The Banks.
02)  Mutual Funds.
03) Insurance Companies.
04) Government -  Taxes.
05) Telecom Companies.
06) Dividend Payouts by Public Companies.
07) Media Houses.
08) Finance Companies.
09) Oil Companies.
10)  Stock Exchanges.

The above list is only a sample and not an exhaustive. Readers are welcome to suggest any additions to the above list.

Over the next couple of months I will be writing in detail, the mechanism through which the  Current Payment Ratio of 30% Electronic-70%Paper can be moved  to  70% Electronic-30%Paper, in  each sector.

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