In what could have brought in the much needed old age security to many Indians through pension reforms, a last-minute change in stance of Leftist unions could leave status quo unchanged and question management credibility of Employees’ Provident Fund Organisation (EPFO).
As the bidding process for managing the additional corpus of EPF closed on June 6, as many as 17 asset management companies (AMCs) submitted their bids.
Successful fund houses would have got to manage the additional contributions made during the year in the EPF, which, according to sources stands at over Rs 25,000 crore.
While bids were invited, and have been received, from both private and public asset managers, the Central Board of Trustees of EPFO does not seem to be in favour of entrusting private fund managers with these monies.
"We are only in favour of public sector companies to manage the fund," said, WR Varada Rajan, secretary, Centre of Indian Trade Unions (CITU) and member of EPFO’s Board of Trustees. "We are not in favour of handing fund management to private players."
The question then emerges: why invite private sector fund managers in the first place? "The bids were open for all but it was done to introduce competition in fund management," said Rajan.
"It (fund management) is open for all and we will select not less than three players to manage the fund based on their merit," said A Vishwanathan, central provident fund commissioner, EPFO.
While credit rating and consulting firm Crisil has been asked to make suggestions that would determine the fund manager’s selection, "The ultimate decision will be made by the financial management committee and Central Board of Trustees," Rajan said.
This means that even though private fund managers have been asked to bid, in all likelihood, if the board maintains its stance of handing over the fund management only to public sector fund managers, private players would be out of the reckoning.
"This should have been decided before inviting the bids," said a senior government official. "I am shocked," said the head of a private AMC. "When we were invited, we were clearly told that they want better management, higher returns and so they want private players to manage the money."
EPFO had invited bids from AMCs to manage the additional contributions to its formidable Rs 350,000 crore corpus. While 22 fund managers applied, 17 have been shortlisted for bidding.
If private managers are excluded, only five state-owned AMCs — SBI, LIC, UTI, Canara Robeco and PNB Principal — will get to manage these monies.