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The selection of the private sector fund manager for the National Pension System (NPS) could take a long time, with the parties preparing for a legal battle.
The Delhi High Court has posted the matter for hearing on May 1. Fund managers said the licence issuing process could be delayed for the next few months due to differences between the pension regulator and the companies participating in the process.
Meanwhile, the Pension Fund Regulatory and Development Authority in a notification late today said that the letter of intent to selected sponsors will be issued on May 9, 2014. The final date of issuance of letters has been already been postponed twice.
The Delhi High Court decided there would be status quo on grant of licences for private sector NPS fund managers. HDFC Pension Fund will continue as a fund manager for the private sector NPS of the Pension Fund Regulatory and Development Authority (PFRDA). PFRDA had disqualified the company from the re-selection process of NPS managers in the private sector.
HDFC Life had last week filed a writ petition challenging the PFRDA's request for proposal, the NPS licence bid process and the wrongful disqualification/ rejection of HDFC Life’s bid.
The company had sought the court’s intervention to protect its rights and that of its subsidiary, HDFC Pension Management Co Ltd, of continuing to undertake the pension business. Upholding its contention, the court had directed the PFRDA inter alia to open the technical bid along with bids of other bidders and evaluate the same in accordance with the law.
In view of further developments in the matter, the company was advised to file a fresh writ petition and it filed the same in the Delhi High Court.
“The court was pleased to direct that the parties shall maintain status quo as of now with respect to the licences. This would effectively mean that the company's pension subsidiary can continue to engage in pension business, unless the court decides otherwise,” the company spokesperson said.
With this, letters of intent, which were to be provided to selected sponsors on Friday will be deferred until further directions from the court. Sources said that PFRDA officials were keen to complete the re-selection process as early as possible.
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. There are also two new entities, Tata Mutual Fund and Birla Sun Life Insurance, which are part of this process.
“The process of grant of new licences might at least take five-six months to be finalised. We are still not sure if all the existing players will be given a licence,” said a private sector NPS fund manager.
In January 2014, PFRDA decided that there would be a re-selection process for private sector fund managers for NPS. The licences that would be issued post this would be valid for five years. Again after five years, there would be another process of re-selection.
Fund managers were displeased with the requirement of re-selection of companies by the regulator, since they were already selected during the earlier process. There are also concerns that the fee paid to them will be further capped with the re-bid process.
To be eligible for managing private sector NPS, the entity must be in a registered financial services business, monitored by the authority or the Reserve Bank India or the Securities and Exchange Board of India or the insurance regulatory body. It also must have a positive net worth (meaning, a profit) and be engaged in financial business for the preceding five years.
NPS is the contributory pension scheme launched by the Union government in January, 2004. It was made compulsory for all new government employees. Those in all non-governmental livelihoods, including those not in any organised sector, were invited to join from 2009. As on end-December 2013, the NPS had 5.85 million subscribers, with an AUM (assets under management) of Rs 42,205 crore.
