New PF mgmt system may get delayed

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New Delhi, Sep 6: The much-awaited switchover to multiple fund manager system for handling the Rs 240,000-crore corpus of the Employees’ Provident Fund Organisation (EPFO) is held up.

Instead of the September 1 date the government was aiming for, the transition is likely to get at least 15 days late. “We are still working out the nitty-gritties of how the new system would work. Until they are ironed out and we are ready to actualise the new system, SBI would continue investing the funds like in the past,” a senior government official told FE.

Oscar Fernandes, minister of state with independent charge of labour and employment, had cleared the appointment of three private sector fund managers— Reliance Capital AMC, HSBC AMC and ICICI Prudential AMC—at a meeting of the EPFO Board on July 29. State Bank of India (SBI), which had been managing EPFO’s funds alone till the decision, was also retained as a fund manager.

Following the decision, the labour ministry and EPFO officials had been striving to ensure that the transition to the new system is complete by September 1, partly because SBI had been served a severance notice from its incumbent role effective August 31. Though the EPFO managed to sign firm agreements with the new private managers before the end of August, it was only able to sign the fresh contract with SBI this week.

Apart from being EPFO’s investment manager, SBI is also EPFO’s monopoly banker. The call to change SBI’s dual monopoly roles had begun a few years back when it was noticed by board members as well as officials that the bank often let EPF contributions lie idle in its accounts rather than invest them. An audit last year also found that SBI invested significant part of EPF monies in its own term deposits.

Along with the abolition of the bank’s monopoly over fund management, the EPFO has also decided to break SBI’s stranglehold on its banking operations. The organisation’s finance wing recently wrote to the top 10 banks in the country seeking details about their branch networks and the kind of facilities they could offer in view of the large amount of funds EPFO deals with.