Just as the country's Employees Provident Fund Organisation (EPFO) started investing a small part (Rs 5000 crore) of its Rs 8.5 lakh crore corpus into equities, the Pension Fund Regulatory and Development Authority (PFRDA) is gearing up to allow private-sector fund managers to manage its Rs 88,000 crore assets.
In an interview with CNBC-TV18, PFRDA Chairman Hemant Contractor told Sapna Das the organization had made a pitch to the Finance Ministry in the regard.
The recommendation to allow private sector fund managers to manage its corpus was made by the Bajpai committee, Contractor said.
"We see some merit in that recommendation and forwarded it to the government. It is currently engaging its attention," he said.
Currently, eight managers (including private sector managers such as ICICI, Kotak, Reliance, HDFC and Birla Sun Life) manage the Rs 6,300-crore portion made up by investments from private sector employees into the National Pension Scheme.
But only LIC, SBI and UTI manage the remaining assets, made up from investments from central and state government employees.
Below is the transcript of Hemant G Contractor's interview with Sapna Das on CNBC-TV18.
Q: We are aware of the Bajpai committee recommendations, it is very important for the pension funds sector, some of these you have already implemented or rather plan to implement, you have put out a press release a month or so back. Now the other aspect of it, the major corpus that has come in under the pension fund sector so to speak is the government corpus. I suppose the figures are anywhere between Rs 60,000 crore and Rs 70,000 crore, we will come to the actual numbers in just a bit, so the point here is that there has been a consistent demand from the industry and this is something the Bajpai committee also recommended, you should be throwing that also open into the private sector fund managers, we have only SBI, UTI, LIC handling the fund management part in terms of the government corpus. So any thoughts on this, is this under active consideration as of now and can we see something on this going forward?
A: You are right that one of the recommendations of the Bajpai committee was that the private sector fund managers should also be given an opportunity to manage government funds and we see some merit in that recommendation and we have therefore recommended to the government that the private sector fund manager should also be allowed to manage the funds of the government subscribers. So, that matter is also currently engaging the attention of the government and we expect to hear from them very soon on this.
Q: This is with the ministry of finance?
Q: When did you write to them?
A: We took it up with them after the report of the Bajpai committee was received about one and a half months ago.
Q: So in the next two-three months hopefully we should hear something from the government?
Q: So far why was it that only the government sponsors were handling these funds, so far why had you only kept it open for the government side, why didn’t you allow the likes of ICICI Bank and HDFC Bank to come ahead and manage the government corpus also, any rationale behind that?
A: It is a legacy issue. We started off with the three public sector fund managers namely SBI, LIC and UTI managing the government funds. So it is a legacy thing and the New Pension Scheme (NPS) started off with the government funds, the subscribers, the civil servants were the first to get covered and therefore at that point of time it was felt that the public sector fund managers should be engaged to manage the fund and then later on the NPS was opened up to the voluntary sector.
So these private sector fund managers came into operation only from 2009 onwards. So since it is a legacy issue, it continued for some time. So it takes time for things to change but now with the recommendations of Bajpai committee being there and there is some merit in what they say so that is why we have taken it up with the government to ensure a level playing field for all pension fund managers.