Uncertainty looms over pvt NPS fund managers' future

Pension Fund Regulatory and Development Authority (PFRDA) has said finalisation of the Request for Proposal (RFP) process for selection of pension funds (PFs) under the National Pension System (NPS) has been extended till further notice. It is almost six months since the first RFP was issued for selection of the players and the final names are yet to be decided.

The pension sector regulator has said the revised dates for the scheduled activities under the RFP process shall be notified on the website. HDFC Life had filed a writ petition challenging the PFRDA's disqualification / rejection of HDFC Life’s bid. Following this, the writ petition was heard by the Delhi High Court and it set aside PFRDA's decision of rejecting HDFC· Life's bid under the RFP for selection of pension fund managers. The court directed PFRDA to evaluate HDFC Life's bid in accordance with the steps outlined in the RFP.

In the earlier bidding process that took place last week, sources said Reliance MF had emerged the lowest bidder at one paisa for every Rs 100 of NPS funds, and others were required to match it. Some players said it was not a viable bid, since it would not make business sense for the companies operating in this space.

Players said if the quotes were too low, there was little incentive. The chief executive of a private sector NPS fund manager said the investment management fee was capped at 0.0102 per cent per annum but was later fixed at 0.25 per cent per annum of the assets under management (AUM). "At one paisa, it makes little business sense since we also need to keep our books intact,” he added, saying they could raise this issue before the regulator.

In the meanwhile, officials said though PFRDA has postponed the bid process till further notice, it may take 30-60 days for the final process to commence. It is also anticipated the two existing private fund managers may not be eligible, based on the bids provided.

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. There are also two new entities, Tata Mutual Fund and Birla Sun Life Insurance, who are part of this process.

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.

After the case where the Delhi High Court had initially decided there would be status quo as grant on grant of licenses for private sector NPS fund managers, the final date of issuance of letters to selected sponsors was postponed several times.

To be eligible for managing private sector NPS, the entity must be in 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 also must 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.