A brewing duel between the country?s second largest non-banking financial institution & largest retirement fund?the Employees? Provident Fund Organisation (EPFO)?and India?s largest bank, State Bank of India, EPFO?s sole banker and investment manager, has now reached a flashpoint.
Even as the process of abolishing SBI?s monopoly in investing EPFO?s funds is underway, EPFO has dismissed the findings of an audit report that has, more or less, given SBI a clean chit on its management of EPF monies. In fact, the EPFO board?s finance & investment committee (FIC) is so dissatisfied with the audit that it has decided to ?refer? (read ?complain about?) the report to the country?s accounting regulator, Institute of Chartered Accountants of India (ICAI), ?for necessary action.?
With returns on its portfolio dipping in recent times to around 8%, EPFO had last year blamed SBI?s sub-optimal investment decisions for the low returns. SBI kept funds ?idling? and invested large sums of money in its own term deposits, EPFO had stressed, even going on to say that the higher the deposits in SBI, the lower the returns. Alarmed, the FIC had called for a ?full-fledged investigation? into SBI?s fund management.
The auditor appointed last March is learnt to have first submitted a draft report without consulting the bank. A ?significantly modified? report was submitted in September 2007, to which EPFO reacted with alacrity seeking more clarity on the auditor?s observations and stressing that SBI?s reaction to most points was ?No comments.?
When the final report was put up before FIC members recently, they concurred that the audit was not ?up to the mark? as the auditors ?have not addressed the concerns of EPFO and have rather shied away from quantifying any notional losses.?