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New guidelines for the registration of the Pension Fund Managers under the NPS

August 7th, 2012 No comments

Last month, the Pension Fund Regulatory and Development Authority (PFRDA) issued revised guidelines for the registration of the Pension Fund Managers (PFMs).  These guidelines are for the PFMs to manage the National Pension System (NPS) in the non-governmental and private sector.  See here.  The NPS was implemented in 2004 for all government employees and later extended to the private sector in 2009.

The guidelines bring about the following changes in the NPS:

  • No limitation on the number of PFMs – Under the previous system, the number of PFMs was predetermined and bidders would then fill up these slots.  There are seven PFMs in the NPS.
  •  No bidding process – In the earlier system, interested parties had to go through a bidding process to become a PFM.  The lowest bidders would be appointed the PFMs.  However, the new guidelines have done away with the bidding system.  Any player interested in becoming a PFM can now do so by fulfilling certain eligibility criteria laid down by the PFRDA.
  • No uniform fee to be charged by all PFMs – The PFMs earlier had to charge a fixed fee amount, which was uniform for all the PFMs.  The new guidelines states that the PFRDA would lay down an overall ceiling and the PFMs would be at liberty to prescribe their own fee provided it is under this overall ceiling.

Although NPS was made accessible on a voluntary basis to non-government employees and those working in the private sector since 2009, the subscription to the schemes under NPS was lower than expected.  In August 2010, a committee was set up under the chairmanship of Mr. G.N. Bajpai to review the implementation of NPS in the informal sector.  The Committee noted that since NPS was opened to the general public there were only 50,000 private sector subscribers until May 2011.  According to the Committee, the low subscription was due to the low-to-negligible distribution incentive to the PFMs to distribute the different schemes to the subscribers to invest their funds.  The Committee thus recommended that PFRDA should consider revising the structure of the NPS so as to increase subscription.  It suggested making the fee structure dynamic for PFMs.  The Committee had also suggested that there should be some revision in the bidding as well as the selection process for the PFMs to increase competition and thereby incentivise them to distribute the schemes.

These changes, as suggested by the Bajpai Committee and now notified by the PFRDA, are different from the original design of the NPS.  The Old Age Social and Income Security (OASIS) Report of 2000, which had initially suggested the establishment of pension system for the unorganised sector in the country, had recommended a low-cost structure for the pension system.  The Report had stated that the choice of PFMs should be based on a bidding process where the lowest bidder should be made a PFM under the NPS.  The rationale for the auction base for the PFMs was that it would provide a system to the subscribers whereby they could make investments for their old age by paying a minimal fee.  A set uniform fee was meant to eliminate the large marketing expenses which would ultimately get passed on to the subscibers.  In addition, the intent behind keeping the fund managers from the distribution and marketing of the schemes was to prevent any mis-selling (misleading an investor about the characteristics of a product) that may happen.

Recent newspaper reports have raised doubt if these new rules would help in increasing the penetration of the NPS in the markets.  However, the chairman of PFRDA, Mr. Yogesh Agarwal, in a recent interview explained that it was important to bring about changes in the structure of the NPS.  According to him a scheme which was mandatory for the government sector could not be expected to perform as well in the private sector (where it is voluntary) without any changes made to its structure.  He also stated that the NPS should be able to compete with other financial products such as insurance and mutual funds in the market.

See here for the PRS Legislative Brief on the PFRDA Bill, 2011.

Notes:

The seven PFMs are LIC Pension Fund Ltd., UTI Retirement Solutions Ltd., SBI Pension Funds Pvt. Ltd., IDFC Pension Fund Management Co. Ltd., ICICI Prudential Pension Funds Management Co. Ltd., Kotak Mahindra Pension funds Ltd., and Reliance Capital Pension Fund Ltd..

 

Changes recommended by the Standing Committee on Land Acquisition and Rehabilitation and Resettlement Bill, 2011

May 18th, 2012 2 comments

(Co-authored by Sana Gangwani and Pallavi Bedi)

The Standing Committee Report on the Land Acquisition and R&R Bill, 2011 was tabled in the Lok Sabha on May 17, 2012.

The major changes to the Bill recommended by the Committee include:

  • Land may not be acquired for use by private companies and PPPs.
  • The role of the local governments should be expanded and made more participatory in the acquisition and R&R process. The role of Gram Sabhas should not be limited to consultation, but their consent should be obtained at different stages.
  • The Clause giving wide discretion to the government in notifying any project as infrastructure project should be deleted.
  • Threshold for R&R provisions should be fixed by the states and not the central government since sale and purchase of land is a state subject in the Constitution (Item 18, State List).
  • There should be a restriction on the acquisition of agricultural land.  The limit on the acquisition of such land should be fixed by the state governments.

For a detailed comparison of the Bill with the recommendations of the Standing Committee see here.

Parliamentary Privilege FAQs

September 1st, 2011 7 comments

We wrote an FAQ on Parliamentary Privilege for IBN Live. See http://ibnlive.in.com/news/what-puri-bedi-are-guilty-of-parl-privilege-faqs/179977-37.html

The full text is reproduced below.

Several MPs have given breach of privilege notices against actor Om Puri and ex-policewoman Kiran Bedi for using “derogatory and defamatory” language against Members of Parliament. In light of this, we explain the concept of breach of privilege and contempt of Parliament.

What is parliamentary privilege?

Parliamentary privilege refers to rights and immunities enjoyed by Parliament as an institution and MPs in their individual capacity, without which they cannot discharge their functions as entrusted upon them by the Constitution.

Are these parliamentary privileges defined under law?

According to the Constitution, the powers, privileges and immunities of Parliament and MP’s are to be defined by Parliament. No law has so far been enacted in this respect. In the absence of any such law, it continues to be governed by British Parliamentary conventions.

What is breach of privilege?

A breach of privilege is a violation of any of the privileges of MPs/Parliament. Among other things, any action ‘casting reflections’ on MPs, parliament or its committees; could be considered breach of privilege. This may include publishing of news items, editorials or statements made in newspaper/magazine/TV interviews or in public speeches.

Have there been earlier cases of breach of privilege?

There have been several such cases. In 1967, two people were held to be in contempt of Rajya Sabha, for having thrown leaflets from the visitors’ gallery.

In 1983, one person was held in breach for shouting slogans and throwing chappals from the visitors’ gallery.

What is the punishment in case of breach of privilege or contempt of the House?

The house can ensure attendance of the offending person. The person can be given a warning and let go or be sent to prison as the case may be.

In the case of throwing leaflets and chappal, the offending individuals were sentenced to simple imprisonment.

In the 2007 case of breach of privilege against Ambassador Ronen Sen, the Lok Sabha Committee on privileges held that the phrase “headless chicken” was not used by Shri Sen in respect of MPs or politicians. No action was taken against him.

In 2008, an editor of an Urdu weekly referred to the deputy chairman of Rajya Sabha as a “coward” attributing motives to a decision taken by him. The privileges committee held the editor guilty of breach of privilege. The committee instead of recommending punishment stated that, “it would be better if the House saves its own dignity by not giving undue importance to such irresponsible articles published with the sole intention of gaining cheap publicity.”

Andhra Pradesh Micro Finance Institutions (Regulation of Moneylending) Act, 2010

December 16th, 2010 No comments

The Andhra Pradesh government issued an Ordinance on October 15, 2010, which stipulated conditions for the microfinance activities in the State. This Ordinance was ratified two months later on December 15, 2010 by the lower house of the Andhra Pradesh assembly.

The key features of the Bill are:
• All MFIs should be registered with the district authority.
• No person should be a member of more than one SHG.
• All MFIs shall make public the rate of interest charged by them on the loans extended.
• There would be a penalty on the use of coercive action by the MFIs.
• Any person who contravenes any provision of the Ordinance shall be punishable with imprisonment for a period of 6 months or a fine up to the amount of Rs 10,000, or both.

The State assembly accepted most of the features from the earlier Ordinance in the Bill. However, the demand for a cap on the interest rates charged by the MFIs for the loans extended to the SHGs was rejected during the ratification.

Allegations against Justice Soumitra Sen: Inquiry Committee Report

December 10th, 2010 2 comments

On December 1, 2010, the Judicial Standards and Accountability Bill was introduced in the Lok Sabha.  The Bill revamps the present system of inquiry into complaints against judges.  The case of Justice Sen was the one of the more recent instances where the integrity of judges has been called into question.

A motion was moved by 58 members of the Rajya Sabha for the removal of Justice Soumitra Sen, (a Judge of the Calcutta High Court) on grounds of misappropriation of funds. The Chairman, Rajya Sabha constituted an Inquiry Committee on March 20, 2009 to look into the matter. The Committee comprising Hon’ble Justice B. Sudershan Reddy (Chairman), Hon’ble Justice T.S.Thakur and Shri Fali S. Nariman submitted its report on September 10, 2010.

Charges framed in the Motion

The two charges which led to an investigation into alleged misconduct of Justice Soumitra Sen were:

  • Misappropriation of large sums of money, which he had received in his capacity as Receiver appointed by the High Court of Calcutta; and
  • Misrepresentation of facts with regard to the misappropriation of money before the High Court of Calcutta

General observations of the Committee on the case:

  • Justice Sen’s assertion that he had the right to remain silent during the investigations was fallacious.
  • He did not cooperate with the Court proceedings; was not present for hearings, did not furnish information requested by the Court and did not provide any evidence in his defence.

Facts and Findings of the investigation by the Committee:

a. During the period he was an Advocate:

  • Justice Soumitra Sen was appointed Receiver in a case by an order of the Calcutta High Court on April 30, 1984. A Receiver appointed by the High Court has the power to collect outstanding debts and claims due in respect of certain goods.
  • As required by the High Court, the Receiver should file and submit for passing,     his half yearly accounts in the Office of the Registrar of the High Court. However, Justice Sen did not comply with this rule both as an Advocate and a Judge.
  • The High Court requires the Receiver to open only one account and not move funds without prior permission. However, the Committee found that two separate accounts were opened by Justice Soumitra Sen as Receiver, with ANZ Grindlays Bank and Allahabad Bank.
  • A total sum of Rs 33,22,800 was transferred in these accounts from the sale of proceeds of the goods which was not accounted for either when Justice Sen was an Advocate or when he was made a High Court Judge.
  • Justice Sen claimed he could not account for this amount since it was invested in a company called Lynx India Ltd. to earn interest. The Committee found this claim to be false as well.
  • The Committee concluded that this was a case of misappropriation of funds as both of the Receiver’s bank accounts were closed with a nil balance without any investments being made on behalf of the High Court.

b. During the period he was a Judge:

  • Justice Soumitra Sen was appointed a High Court Judge on December 3, 2003. The committee noted that Justice Sen’s actions were, “an attempt to cover up the large-scale defalcations of Receiver’s funds”.
  • After he became a Judge he did not seek any permission from the Court for approval of the dealings, as required by the Court, nor did he account for the funds.

Conclusion

Based on the findings on the two charges the Inquiry Committee was of the opinion that Justice Soumitra Sen of the Calcutta High Court is guilty of “misbehaviour”.