The Indian government will make amendments to the Employees’ Provident Funds & Miscellaneous Provisions Act to allow members to withdraw up to 75 percent of their balance in the fund or three months’ wages, whichever is lower, as an emergency measure to tide over any difficulties arising from the coronavirus pandemic. “This announcement, I expect, will benefit 4.8 crore workers, who are registered with the EPF, and therefore will be in a position to withdraw the money,” Finance Minister Nirmala Sitharaman said at a press conference in New Delhi today. India, at present, is under a 21-day lockdown to curb the spread of coronavirus, which has so far has killed 13 and infected more than 600 people. All businesses, except essential goods and services, are shut during the three-week period.

To counter the rise in uncertainty, financial planners have been advising to keep a contingency fund that will cover at least three months’ expenses. To that end, the availability of three months’ wages is a welcome measure, Harshvardhan Roongta, financial planner and founder of Roongta Securities, said.

Agreed Saraswathi Kasturirangan, partner at Deloitte India. The proposal to permit non-refundable advance to employees out of their PF balances would help employees to tide over their liquidity issues, Kasturirangan told BloombergQuint. “Currently non-refundable advances are permitted only for specified purposes such as housing, wedding, etc. Even these are permitted where the employee has put in a minimum services period."

But for the scheme to be useful, Roongta said requests for withdrawal would need to be processed in a timely manner. “It’s also important for the government to ensure that online applications for withdrawals are processed within two or three days and not in a month,” he said. “If the withdrawal is being made it is likely because there is an urgent need for liquidity.”

According to Gaurav Mashruwala, certified financial planner, there should be an option for individuals to take a loan against their provident fund balance. “The government can decide on the interest to be levied,” he said. “The individual can pay back the loan over a period of time. And in this way, the contribution to the provident fund, the nest egg that is being created for retirement, remains intact."

There’s a note of caution as well. Roongta said PF withdrawals should only be made as a last resort. “Investments in the provident fund are considered among the most tax-efficient, because contributions are tax deductible and returns are also tax free.”