New Delhi: State Bank of India (SBI), the nation’s biggest lender, has been entrusted to manage the entire Rs 3.3 trillion Employees’ Provident Fund (EPF) by the labour ministry.
The EPF is the largest social security fund in the country.
New mandate: Labour minister Mallikarjun Kharge.
The decision to give the entire amount to SBI till new fund managers are appointed was taken by the Central Board of Trustees (CBT), the top decision-making body of the Employees’ Provident Fund Organisation (EPFO) at a meeting in New Delhi on Wednesday.
Four fund managers—ICICI Prudential Asset Management Co. Ltd, HSBC Asset Management (India) Pvt. Ltd, Reliance Capital Asset Management Ltd and SBI—have been managing the pension fund for the past two-and-half-years, and their contract with the labour ministry-controlled EPFO was to end on 31 March.
“SBI will manage the fund during the interim period,” labour minister Mallikarjun Kharge said after the meeting. “The CBT has unanimously decided not to extend the tenure of the other fund managers.”
The pension fund’s trustees, in a special meeting held in July 2008, had approved selection of the four fund managers, according to the agenda note prepared by the labour ministry and reviewed by Mint. Initially, the term of contract was for two years that could be extended by a year on mutual consent of EPFO and the portfolio managers. The two-year tenure of the existing fund managers had ended in September and was extended for six months till March-end.
“Since the whole mandate was getting over on 31 March and the new tender is already under process, much should not be read into this decision,” said Sundeep Sikka, chief executive of Reliance Capital Asset Management. “We have been working on the mandate for three years and if we get an opportunity, would like to continue doing so.”
An HSBC spokesperson declined comment, saying the company hasn’t received an official communication about the decision by the pension fund.
“We are in the process of selecting new fund managers within the next three months” (by the end of June), said Kharge, who is also the head of CBT, which comprises representatives from the government, employees and employers.
At least 11 asset management companies, including the above four, had applied to manage the EPF money beginning 1 April. Companies such as Kotak Securities Ltd and UTI Securities Ltd are among others that have shown interest in managing the pension fund. EPFO has forwarded the tender document to the Central Vigilance Commission (CVC), the Central government’s anti-corruption watchdog, for clearance. This is the first time EPFO has sought the CVC’s view in the appointment of fund managers.
“It is better to guard against any eventuality,” Central Provident Fund commissioner Samirendra Chatterjee said. “We have sought clearance from the CVC and (are) awaiting their response.”
A senior official of another asset management company, which has evinced interest in managing the fund, said the move to give an extension to SBI and not to the other three private players is not surprising. “A government agency is bound to prefer another government entity till CVC completes the verification,” the officer said.
Though neither Kharge nor Chatterjee gave any explanation on why EPFO did not continue with all the existing fund managers till the fresh appointments of fund managers are through, labour ministry officials said in the time of scams it is is better to be cautious. “SBI is a government undertaking and there is less chance of any problem. Let the CVC clear all the bidders first. As such, the EPFO is not breaching any contract with Reliance Capital, ICICI Prudential or HSBC as their contract is getting over on 31 March,” said a senior labour ministry official, who declined to be named.
The official said that at a time when the country is facing several scams, there is nothing wrong entrusting the fund with SBI, which has a good track record, during the interim period.
EPF has a total corpus of at least Rs 3.3 trillion, and nearly Rs 40,000 crore is added to its corpus every year.
The retirement fund is largely invested in government bonds. EPFO has as many as 47 million accounts.
ICICI Prudential officials were not available for comment, and Mint could not immediately reach SBI for a comment on the development.