Finance minister P Chidambaram has set the ball rolling for the Pension Fund Regulatory and Development Authority (PFRDA) to open up the New Pension Scheme (NPS), for all private individuals in the country last Friday, without waiting for the PFRDA Bill to get through Parliamentary clearances. Even as the PFRDA gears up to fulfill the fresh mandate, the trustees for the NPS appointed a chief executive officer for the trust after a meeting in the Capital on Tuesday.

The trust, chaired by former Rajya Sabha secretary general Yogendra Narain, has appointed NR Rayalu, former deputy comptroller and auditor general of India, as its CEO. The NPS trust was recently set up by the PFRDA in order to oversee the functioning of fund managers, central record-keeping agency (CRA) and the banker appointed by the interim regulator.

?Since the trust has been made responsible for the employees? pension contributions accumulated under the NPS, it is imperative that it should have the necessary people and infrastructure to monitor the intermediaries? operations. The full-time CEO?s appointment is a start in this direction,? one of the trustees told FE.

Rayalu, who has also been inducted as a trustee, is learnt to have already taken charge of his new role where he is expected to look after the interests of the trust and the stakeholders it represents.

However, the nature of the relationship between the PFRDA and the trust is still nebulous. One of the key issues on the agenda in Tuesday?s meeting of the trustees was the signing of a memorandum of understanding between the two.

?The nature of the relationship between the two needs to be clear as the role of a trustee is onerous. So it?s important that we don?t have to take responsibility for actions we are not directly involved with,? a trustee pointed out.

Since the trust was set up after PFRDA appointed the fund managers and the CRA, it is expected to review these decisions and if required, put in place additional checks and balances. ?If the PFRDA takes decisions and the trustees simply ratify them, like it currently transpires in the mutual funds industry, it?s not an ideal situation. We cannot simply be expected to ratify the PFRDA?s decisions like mutual fund trustees do,? the trustee stressed.

Presently, executive actions with regard to mutual funds are taken by asset management companies? (AMCs?) board of directors. Though independent board of trustees are also in place to ensure that the fund house?s actions are in the best interests of the investors, they usually do little more than ?rubber-stamp? the AMC board?s decisions.

While Tuesday?s meeting discussed these issues at length, no final decision was arrived at about signing the MoU. The MoU is a crucial part of the new regime as it will demarcate clearly the roles and responsibilities of the regulator, the administrators and the intermediaries.

Till the trust was appointed, the administrative decisions were taken by the regulator on the basis of executive orders issued by the Centre. The trust should be seen as truly independent of the PFRDA and the intermediaries in order to generate confidence among participants. ?We made substantive progress on the MoU but it will take some more discussions before it is finalised and signed,? a trustee said.

Apart from fleshing out a clear role for the trust, the NPS trust was also expected to be apprised about the investments made by the three fund managers ? SBI, UTI and LIC ? since they were handed over the Rs 1500-1800 crore corpus in April.

In the absence of the PFRDA Bill becoming a law, the NPS monies are being invested as per the investment guidelines for non-government Provident fund trusts. The fund managers have already utilised the 5% cap on equity investments in the pattern. The PFRDA has asserted that it will utilise the enhanced equity cap of 15% allowed by the finance ministry effective from April 1, 2009.