DECISION ON WHO MANAGES PROVIDENT FUND DEPOSITS

New Delhi: After two private fund managers, ICICI Prudential and HSBC Asset Management Company (AMC), emerged as front-runners to manage Rs 25,000-crore incremental deposits of Employees Provident Fund, a final decision on their fate will be taken on Tuesday by the apex decision-making body on the matter — the EPFO’s Central Board of Trustees.

The Board, chaired by labour and employment minister Oscar Fernandes, will meet on Tuesday to take a final call on recommendations of the EPFO’s Finance and Investment Committee. The committee, in its meeting held last week, had given nod to the pruned list of two private fund managers and a public fund manager, State Bank of India from among the seven private and three public fund managers that had qualified technical bids.

Meanwhile, legal opinion on eligibility of Asset Management Companies or other financial institutions in addition to banks as portfolio managers was sought from the labour and employment ministry. The opinion, which contained certain ambiguity, however, was put aside by Central Provident Fund Commissioner, A Viswanathan, stating that management and deposits or investment of EPFO funds are two different activities. Therefore, portfolio management by AMCs can be made as long as they channelized these investments in the name of the CBT and EPFO within specified guidelines.

However, the proposal is likely to be debated hotly within the board, with employees’ representatives, comprising of leading trade union organisations, opposed to private participation in the fund management.

Earlier, independent consultant, Crisil had been appointed by a three-member committee to assist EPFO in selection of multiple fund managers. Crisil has also been given the mandate to establish an Investment Monitoring Cell and help authorities in monitoring the performance of chosen fund managers for a specified period. Later, EPFO would be expected to build in-house competence for monitoring these fund managers’ performance.

Source: The Indian Express

MEET TODAY TO DECIDE ON EPFO FUND MANAGERS

New Delhi: Efforts by two private sector asset management companies – HDFC AMC and Birla Sun Life AMC – to provide fund manager services gratis for the Employees Provident Fund Organisation (EPFO) and pay certain statutory expenses on behalf of it have been rejected by EPFO’s finance and investment committee.

The EPFO has rejected the proposals made by the two companies based on the opinion of its external legal advisors. The private sector players suggested this strategy to garner a portion of the EPFO corpus (about Rs 1.4 lakh crore) under their management. There were a total of 10 qualified bidders in the fray for becoming EPFO fund managers.

The finance and investment committee, however, has recommended HSBC AMC and ICICI Prudential AMC as fund managers along with the present fund manager -- State Bank of India.

The Central Board of Trustees (CBT) of the EPFO will meet on Tuesday to take a final call on the matter. One of the CBT members, who is also a member of the finance and investment committee, told Business Line that HDFC AMC and Birla Sun Life had made the gratis offer to derive “goodwill” as fund managers of the second largest financial institution in the country after Life Insurance Corporation. This, they felt, would enable them to generate enough business to make good the losses that would be incurred for providing free services to the EPFO.

“The two companies had said that though they would charge no fee as direct consideration for the services to EPFO, but hoped to get compensated in terms of enhanced reputation and brand value,” a CBT member said, adding that the companies had quoted zero rates despite knowing that charges related to custodial services, which are to be borne by the fund managers only, are to be included in their fees. “This is an offer unheard of,” he said.

EPFO’s legal advisors have recommended rejection of the zero rate proposals stating that they are not legally enforceable. The legal advisors state that creation of goodwill cannot be considered as a consideration as it is intangible and uncertain in nature.

“As an agreement without consideration is not a valid contract, hence the defect/infirmity in the contract cannot be cured by relying on the performance guarantee,” they explained while recommending rejection of the proposals.

Source: The Hindu Business Line, The Financial Express

NOW, ALL PSU BANKS MAY GET TO TAKE EPF DEPOSITSIshta Vohra

New Delhi: Public sector major State Bank of India (SBI) is set to lose its monopoly as the only bank where provident fund receipts of over four crore subscribers are deposited. The EPFO establishment is understood to have mooted the possibility of expanding the network by including all other nationalised banks as deposit points. Speaking to the ET, Central Provident Fund Commissioner (CPFC) A Vishwanathan said the proposal to this effect has been mooted and “all nationalised banks have been approached for the same and a response is awaited.” The move is expected to address two key issues: Firstly, it would ensure faster clearance of PF remittances by banks. This would help depositors to start earning interest on their deposits sooner than before. Secondly, higher number of deposit points means increased accommodation of an additional 45 lakh-plus new subscribers expected to come under the ambit of EPF Act shortly. This follows the recent move by the central board of trustees (CBT), according to which, PF provisions will now be applicable to all establishments with 10 or more employees . The EPF Act was till now applicable only to establishments that employed 20 or more employees but the CBT, at its last meeting earlier this month, approved necessary changes in a concerted bid to bolster the EPFO’s sagging finances, thanks to increasingly lower returns on investments. The decision comes in tandem with the EPFO’s finance and investment committee (F&IC ) that on July 25 shortlisted three asset management companies — HSBC, ICICI Prudential and SBI — in the financial round (out of 15) to manage its yearly incremental deposit of over Rs 25,000 crore. “The process of clearing PF remittances and crediting them to the EPFO account will be much speedier than at present for subscribers. Currently, it can take as much as three days or even longer in the event the subscriber/employer does not maintain an account with SBI,” the CPFC pointed out. That delay has proved very costly for the EPF and its finances in the past several decades, as (F&IC ) discovered last year, after an auditor submitted his report on charges of mismanagement of funds by SBI to it. The auditor had cleared SBI of several charges that led to an yield of only 8.25% on the EPF’s investments in 2007-08 compared to the higher yields that even small investors were earning. Bulk deposits by corporate houses in the fixed income market, too, earned rates ranging from 10.5% and 13% for short maturities. The EPFO paid out 8.5% rate to its subscribers despite the poor earnings on investments for the year, leading to a deficit of Rs 263.78 crore. F&IC , which later complained formally to the Institute of Chartered Accountants of India (ICAI) against the auditor’s report, had alleged that SBI had let EPF funds, as much as Rs 150 crore at times on a day to day basis, lie idle in its branches for several days, denying appropriate returns. F&IC’s request of a day to day interest on the funds was turned down by SBI, citing RBI rules. The committee also charged that SBI had deliberately parked a good chunk of EPF funds in the bank’s own low yielding term deposits, ensuring that the EPFO’s returns were low even while the bank advantaged itself. “We hope to see a rise in our subscriber base soon, now that the CBT has approved changes in the EPF law that will bring establishments with 10 or more workers under its ambit. The larger collection base for retirement funds means that its management, and that includes collection, has to be better than it is now,” CPFC Vishwanathan said.

Source: The Economic Times

NOW, ALL PSU BANKS MAY GET TO TAKE EPF DEPOSITSIshta Vohra

New Delhi: Public sector major State Bank of India (SBI) is set to lose its monopoly as the only bank where provident fund receipts of over four crore subscribers are deposited. The EPFO establishment is understood to have mooted the possibility of expanding the network by including all other nationalised banks as deposit points. Speaking to the ET, Central Provident Fund Commissioner (CPFC) A Vishwanathan said the proposal to this effect has been mooted and “all nationalised banks have been approached for the same and a response is awaited.” The move is expected to address two key issues: Firstly, it would ensure faster clearance of PF remittances by banks. This would help depositors to start earning interest on their deposits sooner than before. Secondly, higher number of deposit points means increased accommodation of an additional 45 lakh-plus new subscribers expected to come under the ambit of EPF Act shortly. This follows the recent move by the central board of trustees (CBT), according to which, PF provisions will now be applicable to all establishments with 10 or more employees . The EPF Act was till now applicable only to establishments that employed 20 or more employees but the CBT, at its last meeting earlier this month, approved necessary changes in a concerted bid to bolster the EPFO’s sagging finances, thanks to increasingly lower returns on investments. The decision comes in tandem with the EPFO’s finance and investment committee (F&IC ) that on July 25 shortlisted three asset management companies — HSBC, ICICI Prudential and SBI — in the financial round (out of 15) to manage its yearly incremental deposit of over Rs 25,000 crore. “The process of clearing PF remittances and crediting them to the EPFO account will be much speedier than at present for subscribers. Currently, it can take as much as three days or even longer in the event the subscriber/employer does not maintain an account with SBI,” the CPFC pointed out. That delay has proved very costly for the EPF and its finances in the past several decades, as (F&IC ) discovered last year, after an auditor submitted his report on charges of mismanagement of funds by SBI to it. The auditor had cleared SBI of several charges that led to an yield of only 8.25% on the EPF’s investments in 2007-08 compared to the higher yields that even small investors were earning. Bulk deposits by corporate houses in the fixed income market, too, earned rates ranging from 10.5% and 13% for short maturities. The EPFO paid out 8.5% rate to its subscribers despite the poor earnings on investments for the year, leading to a deficit of Rs 263.78 crore. F&IC , which later complained formally to the Institute of Chartered Accountants of India (ICAI) against the auditor’s report, had alleged that SBI had let EPF funds, as much as Rs 150 crore at times on a day to day basis, lie idle in its branches for several days, denying appropriate returns. F&IC’s request of a day to day interest on the funds was turned down by SBI, citing RBI rules. The committee also charged that SBI had deliberately parked a good chunk of EPF funds in the bank’s own low yielding term deposits, ensuring that the EPFO’s returns were low even while the bank advantaged itself. “We hope to see a rise in our subscriber base soon, now that the CBT has approved changes in the EPF law that will bring establishments with 10 or more workers under its ambit. The larger collection base for retirement funds means that its management, and that includes collection, has to be better than it is now,” CPFC Vishwanathan said.

Source: The Economic Times

CHOLA MS TIES UP WITH CNRI

Cholamandalam MS General Insurance Company Ltd (Chola MS), a joint venture between Murugappa group and Mitsui Sumitomo Insurance of Japan, on Monday announced a tie-up with the Council of NGOs in Rural India (CNRI) to reach out of the rural market.

Source: The Financial Express

LIC FOCUS ON TRADITIONAL PRODUCTS

Mumbai: LIC Insurance Corp of India intends to shift the focus of its sales strategy towards traditional insurance products and tone down the emphasis on unit-linked insurance plans. In an interview to NewsWire18, Mr. Thomas Mathew, Managing Director, LIC said, “There is a shift in our focus, which is toward traditional policies. In the current financial year, we aim 70 per cent of the new business premium coming from ULIPs.”

Source: NW18, The Hindu Business Line