LIC, UTI MF in race for pension bus

Life Insurance Corporation and UTI Mutual Fund are in the fray for entering the lucrative pension business, which is slated to grow to Rs 50,000 crore (Rs 500 billion) by 2010.

Confirming this, the Pension Fund Regulatory and Development Authority member U K Sinha said: "There are many more in the fray."

Life insurers like ICICI Prudential, Birla Sunlife, HDFC Standard Life and Aviva are eyeing the emerging sector, which has the potential to outpace the life insurance industry within a few decades.

PSU banks like Bank of Baroda and Canara Bank are also toying with the idea of tapping long term savings.

Association of Mutual Funds of India is in talks with the interim pension regulator to allow mutual funds to offer pension schemes, its chairman A P Kurian said.

"Internationally, mutual funds and pension funds worked side-by-side," he said while pitching for entry of major mutual funds in the pension business.

Major fund houses like Principal, DSP Merrill Lynch and Templeton are waiting for the final guidelines for entry into the pension sector.

If the PFRDA sets a minimum capital requirement of Rs 100 crore (Rs 1 billion) keeping at par with the insurance industry, sources in mutual fund industry said the foreign players have the deep pockets to fulfill that criterion.

United States-based Principal, for instance, has tied up with Punjab National Bank, Berger Paints and Vijaya Bank for the pension and life insurance foray. Merrill Lynch and Templeton are also leading players in pension business in US and other developed markets.

Bank of Baroda is already on the look out for a common strategic partner for its proposed insurance and pension foray.

PFRDA is in the process of laying down the entry criteria which would be based on a minimum capital requirement, sound track record, efficient manpower and low administration cost.

The final guidelines will be spelt out once Revenue Secretary Vineeta Rai takes over as PFRDA chairman, hopefully by April.

"Government will permit all those players who would fufill the entry criteria," Sinha said.

Indications are that PFRDA may allow at least nine private players in the first phase. When the market matures, more players may be allowed, he said.

Apart from fund managers, PFRDA will also invite bids for Central Record Keeping and Accounting Agency.

Market sources said National Securities Depository Ltd, UTI-ISL and Stock Holding Corporation are in the fray for the CRA.

As a precursor to opertionalising the new pension scheme, Centre will shortly invite Expression of Interest for setting up of CRA which can handle transactions worth over Rs 1,00,000 crore (Rs 1,000 billion).