Fund managers list didn’t have finmin nod

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New Delhi, Aug19: When the labour ministry announced the appointment of four fund managers to replace State Bank of India’s monopoly over the Rs 240,000 crore Employees’ Provident Fund Organisation (EPFO) on July 29, not only did it brush aside the strong dissent expressed by trade union representatives on the EPFO Board, but also several concerns raised by the finance ministry about the fund managers’ selection process and the potential legal consequences that could arise. Even as board members have protested the draft minutes of the July 29 meeting, the labour ministry has once again ignored the North Block’s explicit concerns that the allocation of funds to the new managers could become a case for ‘legal action.’

As per the draft minutes of the board meeting available with FE, the original plan (as confirmed by ministry officials at the time) to let the EPFO Board’s Finance and Investment Committee arrive at the allocation formula for the funds to be divided among the four managers has been junked. The amount to be allocated to State Bank of India, HSBC AMC, ICICI Prudential AMC and Reliance Capital AMC — would now be decided ‘with the approval of the chairman’ of the Board, minister of state for labour and employment Oscar Fernandes. The finance ministry representative had advised the Board to avoid an allocation formula ‘whose basis can be argued.’

The finance ministry had pointed out at the 29 July Board meeting that the allocation formula should have been fixed and informed to the bidders “at the initial stage” as the basis of allocation “can be argued at post bid stage and it may become a case for legal action”. The finance ministry had referred to the “very painstaking and a detailed exercise” it had employed to pick multiple fund managers for government employees’ New Pension Scheme under the Pension Fund Development and Regulatory Authority (PFRDA).

Board members, already upset at the selection process and the surprise late-entry of Reliance into the list of managers, are furious at this change of stance, reflected in the draft minutes of the meeting and havetaken a strong exception to the way the minutes have been ‘doctored’ to align with the last-minute decision to add Reliance Capital to the list of three fund managers submitted by the FIC.