Monitoring Pension Funds

The regulator’s job is not over with just putting in place the architecture for management of pension funds or for that matter, any fund. In the past there have been occasions when not only the regulated but also the regulator has failed miserably.
THE MULISH PENSION reforms in the country seem to be gathering pace with the Reserve Bank of India (RBI) announcing norms for management of pension funds by banks.  The announcement is a sequel to the government’s decision to allow banking companies to manage pension funds.  The eligibility criteria for fund managers for the government’s New Pension Scheme (NPS) have been laid down by the Pension Fund Regulatory and Development Authority (PFRDA).  RBI norms intend to eventually permit private and foreign banks to enter the business of pension funds management.  I sound a bit cynical because of the poor management of the funds of the Employees’ Provident Fund Organisation (EPFO) by the country’s leading commercial bank, the State Bank of India (SBI).  Interestingly, lesser known Provident Funds (PFs) returned better income at the time.  If the Chennai-based Royapettah Benefit Fund (RBF) went down with Rs 450 crores belonging to over 1,00,000 small investors, part of the blame lies with RBI too. RBI’s inaction amounts to collusion with the RBF management, covert or overt. 

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