Pvt NPS bids: DSP BlackRock, Tata Asset Mgmt opt out

Final letters issuance to be decided by regulator today, beside draft guidelines for operations

DSP BlackRock Pension Fund Managers and Tata Asset Management Company have opted out of the race to become fund managers for managing the National Pension System (NPS) for the private sector.

While the former was already a fund manager, the latter had applied for the first time when Pension Fund Regulatory and Development Authority (PFRDA) sought a re-bid process in January.

Officials said these two entities opted out since they did not find the bid viable. Neither could be reached for comment.

Senior PFRDA officials said the final letters issuance process would be decided at their board meeting on Friday. Detailed guidelines for private sector NPS fund managers will also be put up on the regulator’s website, to be finalised after opinions/comments from all stakeholders. Reliance Mutual Fund was the lowest bidder and had quoted a fee of one paisa for every Rs 100 of funds.

Other bidders were asked to match this. The other bids were in the range of 10-25p. While fund managers had expressed concern about the lowest bid being too low, sources said they'd agreed to match it, to be in the business.

Earlier, in the NPS space, the regulator had capped the investment management fee at 0.0102 per cent per annum but this was later fixed at 0.25 per cent per annum of the assets under management (AUM).

In the norms proposed by PFRDA in its Request for Proposal (RFP) for selection of fund managers for the private sector NPS, the fund managers were required to match the lowest bid to be eligible for a licence.

The selection process has already been marred with some controversy. While a section complained the lowest bid was not sustainable, one of the bidders, HDFC Pension Fund, was initially not considered eligible.

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 had applied. There are also two new entities, Tata Asset Management Company and Birla Sun Life Insurance, also part of this process.

In April, HDFC Life petitioned the high court in Delhi against the disqualification of its bid (HDFC Pension Fund is the wholly owned subsidiary of HDFC Life). In May, the court set aside PFRDA's decision and asked it to re-evaluate the HDFC bid in accordance with the steps outlined in the RFP. After this, HDFC Pension Fund was back in the process.

In January, PFRDA had said all existing private NPS fund managers and new ones would have to take part in a re-application process. The licence would be issued after this process and be valid for five years. To be eligible, the entity was to be a registered financial services business, monitored by the authority or the Reserve Bank or the Securities and Exchange Board of India or the insurance regulatory body. It was also required to have a positive net worth (meaning, a profit) and be engaged in financial business for the preceding five years.

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 on end-December 2013, the NPS had 5.85 million subscribers, with an AUM of Rs 42,205 crore.

As of June 7, the NPS had 6.84 million subscribers. The total AUM was Rs 56,000 crore and seeing month-on-month growth of eight to nine per cent.