Fund managers write to PFRDA seeking viable margins for business

Fund management companies, who are part of the bidding process for managing National Pension System (NPS) for the private sector, have written to the Pension Fund Regulatory and Development Authority (PFRDA) regarding the bidding process for the selection of fund managers. These companies have expressed their concerns about the bids being very low and not viable to conduct business on a longer term.

In separate letters addressed to the pension regulator, fund managers have said the lowest bid of 1 paise for every Rs 100 of NPS funds would be difficult to match by others. The chief executive of a fund management company explained that the average bids were in the range of 20-25 paise. “If we are required to match an extremely low bid, it would be a challenge to run NPS business for a long term,” the official said.

The pension regulator is looking into this process. A senior PFRDA official said the evaluation committee is looking into the re-bid process and would take a call on the concerns raised.

Last week, the commercial bid of HDFC Pension Fund Management Company, wholly owned subsidiary of HDFC Life Insurance has been considered for the selection of fund managers for NPS in the private sector.

In April, when HDFC Life had filed a writ petition in the Delhi High Court, challenging PFRDA's disqualification of the former's bid. Post this, the court in May, set aside PFRDA's decision of rejecting HDFC? Life's bid under the Request For Proposal (RFP) for selection of pension fund managers. PFRDA is the pension sector regulator.

HDFC Pension Fund, SBI Pension Fund, LIC Pension Fund, UTI Retirement Solutions, ICICI Prudential Pension Funds, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund and DSP BlackRock Pension Fund Managers have applied for securing a licence. There are also two new entities -- Tata Mutual Fund and Birla Sun Life Insurance, who are part of this process. R V Verma, officiating chairman and whole-time member (finance) of PFRDA, had recently told Business Standard that they wanted to expedite the process of issuing licences to fund managers for NPS in the private sector. He had said the process would be completed as early as the next 30-60 days.

In January, PFRDA had said all existing private NPS fund managers and new players would have to take part in a re-application process. The licence would be issued post this process and will be valid for five years, after which there would be a bid again.

NPS is the contributory pension scheme launched by the Union government in January 2004. It was made compulsory for all new government employees. Those in all non-governmental livelihoods, including those not in any organised sector, were invited to join from 2009.

As of June 7, NPS scheme has a total of 6.84 million subscribers. The total assets under management stood at Rs 56,000 crore, which was seeing month-on-month growth of eight or nine per cent.