NSDL's pension agency plan faces Sebi block

The National Securities Depository (NSDL) bid to act as central record keeping agency (CRA) for pension funds seems to have hit the a roadblock with the Securities and Exchange Board of India (Sebi).

It is learnt that the capital markets regulator has expressed reservations about NSDL acting as a CRA, citing that it falls outside the basic objective of the depository, established under the Depositories Act, 1996.

Significantly, it was the Pension Fund Regulatory and Development Authority (PFRDA), which proposed the name of NSDL for the pension fund record keeping job.

This is not the first time that Sebi is objecting to NSDL's business plans. Earlier, the regulator had denied NSDL from bidding for the e-stamping project, which was later awarded to the Stock Holding Corporation of India (SHCIL).

The corporation is now battling a series of charges ranging from misappropriation of funds to stake sale in subsidiaries to unknown entities without the knowledge of its board.

Under the proposed new pension plan, government employees who started service from January 2004 are required to contribute a part of their salaries to the pension fund. The government will contribute a matching amount and continue paying the pension of employees on the rolls before 2004.

NSDL executives declined to comment on the development owing to its sensitive nature. "We don't want to comment on this topic," a senior executive said.

Following the regulator's reservations, the NSDL may now think of roping in subsidiary, NSDL Database Management Services Ltd, for undertaking the task.

The subsidiary was put forward by NSDL for its National Skills Registry (NSR) project, which is now undertaking a project for Nasscom to promote the IT and ITeS industry.

NSR involves third-party verification of personal, educational and career information of the IT professionals in the country.

The agreement between PFRDA and NSDL is yet to be signed as final negotiations are still going on. The CRA will be responsible for keeping the accounts of members of the national pension scheme (NPS).

A week ago, the PFRDA also received technical and commercial bids from the SBI, LIC, IDBI Capital and UTI AMC for managing the Rs 1,500 crore pension funds.

Three AMCs will be selected for the purpose. The successful bidders will float a separate subsidiary for the fund management and their parent will be the sole sponsor.

Under the NPS, fund managers will be allowed to invest up to 5 per cent of the total corpus into equities. Even though the Pension Bill is still pending the in the Parliament, central and state governments have permitted limited equity investment through the pension fund.