HSBC, ICICI Pru, Reliance Capital to break SBI monopoly in managing the fund.
Monopoly of state-owned SBI in managing provident fund totalling about Rs 2.5 lakh crore today ended with the government allowing three private players, including ICICI and HSBC, a piece of the cake.
Anil Ambani group firm Reliance Capital is the third private player that would share the management of the provident fund that is deducted from the salaries of about 40 million workers in the government and organised sector.
“The Central Board of Trustees (of the of the Employees Provident Fund Organisation) have decided to allow Reliance Capital, ICICI Prudential, HSBC and SBI to manage provident fund of employees,” Labour Secretary Sudha Pillai told reporters after the meeting of trustees here today.
Asked if the Finance and Investment Committee of the Employees Provident Fund Organisation (EPFO) had shortlisted just three players for managing the fund, she said that 10 financial bids were taken by the government and based on this four companies have been given the mandate.
However, DL Sachdeva, a member of the Central Board of Trustees, said that only three players were cleared by the committee but Reliance Capital was added later.
HSBC emerged as the lowest bidder for the fund followed by ICICI Prudential, SBI and Reliance Capital, officials said, adding that allocation of fund for the management to the successful bidders based on the asset management fee would be taken by the Finance and Investment Committee of the EPFO.
The meeting, chaired by Labour Minister Oscar Fernandes, took the decision amid protests by representatives of labour unions affiliated with Left parties.
Analysts said that the entry of private players may help the EPFO to offer high interest rate to its subscribers, as against 8.5 per cent at present.
Talking about the allocation of fund, Pillai said, “The corpus fund will be proportionately allocated now to the four fund managers and that will be decided in the next meeting.”
Interestingly, the board members today ignored the opposing Left-aligned trade unions, who were against selecting private firms to manage the corpus fund.
The Left parties, which had been going whole hog in demanding the hike in interest rate and opposing the induction of private players, have withdrawn support to the UPA recently, paving the way for the government to undertake economic reforms.
Currently, the government is paying about Rs 4-5 crore to State Bank of India to manage the corpus fund. After the induction of more fund managers, the fee is expected to be reduced to Rs 2.5 crore.
“We are saving around Rs 2.5 crore for the management of funds right away and also the private players will do the servicing of our previous investments in the same amount,” she said.
Among all the four bidders, HSBC quoted the lowest asset management fee of 0.0063 per cent where as ICICI prudential would charge 0.0075 per cent while SBI and Reliance would be charging 0.01 percent accordingly.
Replying to a specific query on the inclusion of Reliance, Pillai said, “There is no political connection to be seen in the inclusion and they were always there in the bidding list.”
The Central Board of Trustees of the EPFO had deferred a decision on the interest rate when it had last met on July 5, since the private players were in the process of being shortlisted.
