For provident fund investors seeking higher returns, fund managers striving to increase their corpus, and a financial system yearning for greater efficiency, backtracking of reforms is a habit to be taken in stride. That such a step has been taken in just 10 days, shows the contempt with which public bodies look at the reforms process.
It is not only private fund managers that Left-backed union leaders are against, as reported by Hindustan Times last week. Even state-owned mutual funds will not be allowed to manage the additional contributions made by workers to their provident fund, which according to sources, adds up to Rs 25,000 crore per annum.
This is after as many as 17 asset management companies (AMC, firms that launch and manage mutual funds) were invited by Employees’ Provident Fund Organisation (EPFO), and have filed their expressions of interest (EoI) with it.
“At best we will go for another public sector bank,” said W.R. Varda Rajan, secretary, Centre of Indian Trade Unions (CITU) and member, Central Board of Trustees (CBT) of Employees’ Provident Fund Organisation (EPFO). “No associates of banks will manage this money.”
By that he means AMCs launched by public sector banks will not be allowed to manage the money. “We are not thinking in terms of considering the associate institutions of public sector banks,” he added. Interestingly, no bank has submitted its EoI for managing the money.
But hopes ride high. “It’s a very good beginning and first time the government has accepted our proposal to invest through mutual funds,” said A.P. Kurien, chairman, Association of Mutual Funds in India. “It may not happen this year but I am sure that going forward the investor community, whether it is provident fund or pension fund, will have the freedom to choose the best.”
According to the head of a private AMC, “It might not happen this year but the fund management will come to fund houses in the coming years.” Rajan’s new stance negates EPFO’s April 17 invitation to “to appoint multiple fund managers to manage its corpus”. EOIs were invited from “fund managers / portfolio managers appropriately registered with Securities and Exchange Board of India / Reserve Bank of India for appointment as fund managers of the EPFO’s corpus.”
Nowhere was it mentioned that private or public AMCs will not be appointed. Or that only public sector banks need apply.
The EPFO board will meet on July 5 and if it goes for a consensus, as it has been the practice for all its decisions so far, the whole process of inviting EoI and tenders will have to be scrapped.