Private sector NPS: Fund manager selection process hits legal hurdle

The selection process of pension fund managers for the private sector under the National Pension System (NPS) is facing legal hurdles.

Acting on a writ petition by HDFC Life Insurance, the Delhi High Court on Tuesday directed the pension regulator, PFRDA (Pension Fund Regulatory and Development Authority), to maintain status quo on the existing licences and posted the matter for hearing on May 1.

This would effectively mean that PFRDA cannot proceed with the selection of new pension fund managers and that HDFC Life’s pension subsidiary can continue to engage in the pension business, unless the court decides otherwise.

HDFC Pension Management Co, a wholly-owned subsidiary of HDFC Life Insurance, was among the 10 bidders who had evinced interest in managing NPS for the private sector. But its bid was summarily disqualified by the PFRDA on technical grounds.

“We are pained about this unfair disqualification. We had no option but to move the Delhi High Court. We hope PFRDA will reconsider it”, Sumit Shukla, Chief Executive Officer, HDFC Pension Management Co, told Business Line .

Last week, Reliance Capital’s pension fund management subsidiary had emerged as the lowest bidder when commercial bids were opened by PFRDA. This subsidiary had bid at a fund management fee of one paisa for every ₹100 of assets under management. PFRDA had then asked other bidders to match the lowest bid.

This time, the PFRDA had taken the auction route to decide on the pension fund managers. This was a departure from the revised process of September 2012, which allowed any technically qualified fund management entity to enter the ring as long as they are ready to work with fee cap of 0.25 per cent a year of the assets under management.

The pension regulator had not specified any floor or cap for the fee structure.

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