India’s largest bank, the State Bank of India, is likely to lose its monopoly to manage funds of the national social security scheme as the Employees Provident Fund Organization (EPFO) plans to appoint a consultant to explore ways to introduce competition in fund management.
SBI manages about Rs173,000 crore (end-December 2006) that is spread between Employees Provident Fund and Employees Pension Scheme. Investment guidelines are restricted, with most of the money being invested in Union and state government securities.
EPFO’s finance and investment committee at its meeting on Wednesday decided to appoint a consultant who would be commissioned to come up with a road map to introduce competition in the management of the funds.
The committee felt competition would be needed to benchmark SBI’s performance, said a member.
The committee’s decision comes in the backdrop of the fund’s lacklustre returns (8% in 2006-07) despite hardening interest rates, particularly in the last quarter.
As of now, the committee has not ruled out allowing private-sector entities such as banks to compete for a chance to manage the funds.