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The case related to the disqualification of HDFC Life from re-selection of National Pension System (NPS) managers for the private sector would be taken up on Tuesday, the Delhi High Court said on Friday. Till then, the status quo on NPS licences would be in place, it added.
Sources said though the Pension Fund Regulatory and Development Authority (PFRDA) had said letters of intent to the selected sponsors would be issued on May 9, the process might be delayed because various structural processes might take time to be completed. The issuance of these letters has already been postponed twice.
Sources said PFRDA officials were keen to complete the reselection as soon as possible. The licences issued will be valid for five years, after which there will be another round of reselection. PFRDA has sent a response already to HDFC Life giving the reasons for its rejection. However, since the case is in court, the two parties will respond to this issue in court next week.
“The court directed the parties to maintain status quo as of now, with respect to the licences. This will effectively mean the company’s pension subsidiary can continue to engage in the pension business, unless the court decides otherwise,” said a company spokesperson. He added the company had communicated the court’s order to PFRDA.
Last week, the court had said there would be status quo on the grant of licences for private sector NPS fund managers. As such, HDFC Pension fund, a unit of HDFC Life, was to continue as a fund manager.
Earlier, PFRDA had disqualified HDFC Life from re-selection of NPS managers for the private sector. It has also written to HDFC Life, citing the reasons for the rejection.
There has been speculation HDFC Life’s proposal was rejected because the company wasn’t profitable. Sumit Shukla, chief executive of HDFC Pension Management Company, said he couldn’t comment on market speculations. He, however, added the company was profitable.
In the third week of April, HDFC Life had filed a writ petition in court, challenging PFRDA’s request for proposal, the bidding process for NPS licences and the rejection of HDFC Life’s bid. The company had sought the court’s intervention to protect its right and that of its subsidiary, HDFC Pension Management Company to continue the pension business. The court had directed PFRDA to evaluate HDFC Life’s bid on an equal footing as those of others.
HDFC Pension Fund, SBI Pension Fund, LIC Pension Fund, UTI Retirement Solutions, ICICI Prudential Pension Funds, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund and DSP BlackRock Pension Fund managers have applied for reselection as NPS fund managers for the private sector. Two new entities, Tata Mutual Fund and Birla Sun Life Insurance, have applied for fresh licences.
Sources said at one paisa for every Rs 100 of NPS funds, Reliance Mutual Fund had emerged the lowest bidder in the bidding process that began last week. The other applicants are required to match this bid.
To be eligible to manage private sector NPS, an entity must have a registered financial services business and be monitored by PFRDA, the Reserve Bank of India, the Securities and Exchange Board of India or the Insurance Regulatory and Development Authority. Also, it must have positive net worth (a profit) and it must have run the financial services business for the preceding five years.
NPS, a contributory pension scheme, was launched by the Centre in January 2004. It was made compulsory for all new government employees. In 2009, those in the private sector were invited to join. As of December-end 2013, NPS had 5.85 million subscribers, with assets under management of Rs 42,205 crore.
