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AVENUE: ~

.Conference Hali~ .~'3rd, Floor, EPFO ( Head Office), i

Bhavishya Nidhi Bhawan, ')'.. 14, Bhikaiji Cama Place, i

EMPLOYEES' PROVIDENT FUND ORGANISATION; ".

: .NEW DELHI .'.".~ :.. ,

126th . Meeting of the ::

FINANCE INVESTM'ENT AND AUDITCOMMITTEE

[A SUB· COMMITTEE OF THE CENTRAL BOARD,

EMPLOYEES' PROVIDENT FUND)

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On

27.06.2016 at' 2:00 P.M.

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EMPLOYEES' PROVIDENT FUND ORGANISATION

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Central Board, EPF.

AGENDA. BOOK126th' Meeting of the Finance I~v~stment and Audit Committee,

Date: 27.06.2016 IND EX 0 F ITEMS Time: 2.00 P.M.

Item

\No. Agenda Page No.

r. Confirmation of the Minutes of 12Slh Meeting of the Finance 1- -:tInvestment & Audit Committee (FIAC ),liel(on'2,4.0S.2016

2. Action taken report on the recommendation of the 125t1t~_\o

Meetingof the Finance Investment & Audit Committee (FIAC)held on 24.05.2016

3. Revision of Service Charges on Collection by State Bank of H- \\.tIndia.

4. ,Prop?sal for amendment in EPF Scheme, 1952 for engaging \s-.....1<:0Private Sector Banks- [CICI Bank, HDFC Bank and Axis Bank-in addition toS81 and other Nationalized Banks for collection ofcontributions.

5. Selection of Asset Management Companies as ETF T~I1Mrmanufacturer for investing in ETF by EPFO.

6 . Anyother item (sj.with the permission of the Chair.

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126ti.l Meeting of FIAC 27.06.2016

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Item Np. 1: Confirmation of the Minutes of 12STH Meeting ofthe Finance Investment and Audit Committee heldon 24.05.2016 at EPFO,Headquarter, NeYi Delhi .

Minutes of 125TH Finance Investment and AuditCommittee (FIAC) meeting held on 24.05.2016 was circulated vide

letter No. Invest.l/1(12STH)Mtg./FIAC/2016/4281 dated 30.05.2016 .

Copy of the minutes is enclosed as :Annexure -'A' of this item. This.-

office has not received .anv observations from the members on the

minutes of the meeting. .

Minutes may be taken as confirmed.

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Telephone: 26178450 Fa~No: 26194349I.

," Cff J4 it!:ft 301 fa 1l4;q ~ :aaIoCff

',. "Employeesi:.Provident Fund Organisation

.' , ct~ va- ~~, 3mn tR""flR) ~(Ministry~; Labour & Employment, Govt. Of India) ,

SHiil4ii'44 / Head Office~ ~Bhayisbya N;dhiBhawlo. 14-Bblkal1! eam, Pla~. New Oelbj-llq066

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All Members,Finance Investment & Audit Committee,Central Board of Trustees, Employees' Provident Fund

\1:ir DatE::

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No. Invest.l/l( 1251h) Mt9./FIAc/~\

To

Sub: Forward.ing of Minutes of 12Sth Meeting of the Finance Investment & AuditCommittee: (FIAC), CST, EPF held on 24.05.2016 at EPFO Head Office, NewDelhi - Reg..

Sir,

Minutes of 12Sth meeting of the Finance Investment & Audit Committee

(FIAC) held on 2~.05.2016 approved by the Chairperson is enclosed herewith for

your kind perusal and necessary action please,

Encl:- As above

Yours faithfully,

~v-f~~

' .. ' .... (A~SI~GH)Regional P.F. Commissioner-II.{INVEST.)

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Copy forwarded for information and necessary action Dlease, to:

: .,~ 1.. P.S. to Central Provident Fund Commissioner, EPFQ, Head Office., t'.~. 2. P.S. to FA & CAO, EPFO,Head Office.

" ~)S...--r ACC-! (F&A/IMC) EPFO, Head Office. ~;'t' ,•• 4. ACC-! (Pension) EPFO, Head Offi~e. ~\\~'d.

I~L Regional Provident Fund Comrnlssloner-I (Finance & Accounts) EPFO, Head- ~~~ ,

,. Office. : "., " '

" " ~. ACC-II (Audit), EPFO, Head Office .• Cfj~ ~"_~~\:' Regional Provident ,FundCcmmisstoner-Il (Conference), EPFO, Head Office.

~{~\)"=6f:f.l"-:a.All Regional Provident Fund Commtssloner-Il (IMC), EPFO, H~ad Office.

~o\~~\\b(ANOOP KATIYAR)

Assistant P.F. Commissioner (tMe)

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(\ \\0\ ,- Minutes of the 125th Meeting of the Finance Investment & Audit

Committee (FIAC) held on 24.05.2016

1. 'The 12~thMeeting of FInance Investment & Audit Committee of CST, EPF,chaired by. :

Dr. V.P;· joy Central Provident Fund Commissioner was held on 24;05.2016 from1l.OO.A.M: onwards in the Conference Hall, 3rd Floor, EPFO,Head Office, New Delhi.

,,

2. The following members/representatives were present In the meeting.

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Heera Lal Samariya Additional Secretary ( , MinistryEmployment, Govt. of India,

Labour &

Govt. of India was also present during the meeting .FA& CAO, EPFOwas convener of the meeting.

3.

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The Chairman welcomed all the members and officers present hi the meeting.I

Thereupon the agenda were taken up. \I

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Item No.1:•••••.• _-'11

Confirmation of the Minutes of 124th Meeting of the Finance Investment

& Audit Committee (FlAC) held on 22.03.2016~

..... It was suggested by Shri P.J.BanasureMember Central Board to record the

. minutes and elaborate in future. With this suggestion, .the minutes of 124"

Meeting of the Finance Investment & Audit Committee held f;;;;:. n 22.03.201'6were confirmed. .

Item No.2: Action taken report on the recommendation of the 1 Meeting of.Flnance Investment &. Audit Committee (FlAC) held ..•...••.."'~.•_2Q16.

The action taken report as placed was taken note of by the

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Se<:tio~g~;~raft~;:i:W~~~~;~"

Section 4,

4.1.1 by a agreed by. .team consisting of one

leader and at I~.st two.,staff personnel. The

leader of the' team

should be 3- qualified

that staff personnel in

the proposed execution

team mentioned in this

clause should be

Chartered .Accountants

chartered accountant with at least one year of

with at least five years work experience.

of experience in the

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leader of the Team is

not a Partner of theAccountant

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least three years of

experience in the field

of Portfolio Audit. The

audit should be carried

out under directsupervision of a Partner

of the chartered

accountant firm if the',' .

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Item No.6: Concurrent Audit Reports of Provident Fund (including other funds)

and Pension Fund for.the month of September 2015 to March 2016.

It was decided by the members that from next FIACa consolidated' Action. .taken on the observencns made' by ECA shall be placed as Agenda item in. . :

the FlAC. The Audit Report- need not be sent by post to members. The

~eport be placed in the meeting for reference if any needed at the time of

deliberation .

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; \ r,\". -"Item No.7: Selection of Mutual Fund as ETF'manufacturer for investment in

ETFs by EPFO.

FA& CAOsuggested that the following further criteria may be considered forinclusion in the draft RFP,

i. The tracking error can be calculated using the total return index.The number of ETFclients both institutional & retailers.

The promoter company international experience in ETFbusiness:' as ETFs In India Is nascent.

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: Mis CRISIL informed that with regard to

provlsion has already at point no.6.3.1.5.

other two pointsCOmrY\it1·o:>ct."'rl'

ailowed .connnued, JS -.polntt;d~l~ed as Single.sourc~;sej'~o~.·a~"lriiti~1'stag~:With a ~11;:ll;J..~.\J~~~~:~';:~- ..:~ . 1. ;(_y-. 'iA·, :';, ". ,j .;

~.~lJfterm WQUldb~~·UPt~.3.~ti~,~~;2()~.~~·Thi~.p:~asSI"JbS~l{.el'1to 3,Oth June '2016cwitll;, ,th.e.~·qlte<;tlons'that.( process sel~~i!;1"~l).Q

mai1~facturer foIlO~iri9~~&~t~&~;~fiB~d be 'o:>r"noI1etea:",~, .:;~~;~;,~~~;?/r:~"E~e Chairma~'~9~~~~"iiat·~t'ce the CST·"""

numb~in}~tua' fund to "be; ~Iected as ETF4\,....,,~·<,,·. .:approvarof:Ceq~l. 30ard~hrthis regard in its

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regard to thiS.b~~~~U~.~~~~~~\:~,r":~.~":~~~~~~~?may be advertlsed.i1i~·· . ~~i;~;;~S::

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Proposal for increasing the number of days for borrowing of funds1

from CBLO for participation in primary auctions of fovernment

securities and corporate bonds from existing 15 to 30 d,yS.The item was approved by the Committee. The same shhu be placed

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in the next CSTMeeting.eo

The meeting ended with a vote of thanks to the chair.

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Item No.8:

7

1~f5th Mf~tjng of FIAC 27.06.2016

. Item No 2: Action Taken Statement on the minutes of 12STH meeting of theFinance Investment and Audit Committee (FIAC) held on24.05.2016

------_ ....__ ..._._----_ ..- ._--_._----_._--_ .._ .. --'.Decisions/ Directions of FIAC

-···--·-r-----------: Sr I,: No.t ~--------~--,------~------------------------4-------------CBLO borrowing transactions by the' Portfolio Managers

during the period 01-03-2016 to 31-03-2016. .!!\

!\ I The item was taken note of by the Committee. The same shall I An agenda for the same!~ : 1.' be placed in tbe next CST Meeting. will be placed in upcoming I" \ 213th reting of CST, I~ I (Item no. 3of 12st" FIAC) \ \

~. r--:-t--1R-eq-u-e-s-t-f-o-r -Pr-o-p-o-s-a-' (-R••..F~P-}-f-o-r -A-p-po-i-n-tm-e-n-t-a-s-E-xt-e-r-n-a-I ·t-_·t-.:. '-'" !\

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~ The approved RFP for \, I

appolntment of External!tI~ Concurrent Auditor( ECA) i

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• [ has oeen published vide ladvertisement No. ·. ,

davp/23109/11jOOll/1617 :dated 6-06-2016 'and;corrigendum vide NO.!davp/23109/11/0013/1617 :dated 23-06-2016. ' :,

The pre bid!conference is scheduled:to be held on 27-06-2016;at 3.00 PM and the RFP I

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. ~ II' Iof experience In the. . I field of Audit and at• . I least three years of

_ experience in the fieldI of Portfolio Audit. The

• audit should be carried

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i! I supervision of a Partner'I of the chartered• '_.'I l..;;;ca.;;..;cc~o..;;;u_nt_a;.;..;n.;;;..t_fir~m~if..:.th;.;.:e=--.•...••.. --LiL

The committee members approved the draft RFP forappointment of External Concurrent Auditor (ECA) for the auditof investments done by EPFO's Portfolio' Managers subject to the Ifollowing changes: ,

I Section Contents of the clause Change suggested andof draft agreed QY FIACRFP v members.

Ensure that that audit is It was discussed andSection to be conducted by a agreed by all members4, clause team consisting of one that staff personnel in4.1.1 leader and at least two the proposed execution

staff personnel. The team mentioned in thisleader of the team clause should beshould be ?1 qualified Chartered Accountantschartered accountant with at least one year of .

I with at least five years Iwork experience.,I:

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process is under way.

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1\' not a Partner of the ! jI Chartered Accountant !

firm. i

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Additionalitemproposedto be

I addedinI RFP.

NA •• It was discussed andagreed by all membersthat only auditors II empanelled with \. com. ptroller and Auditor II General of India (CAG)as on the date of RFPshould be eligible.

(Item no. 4 of 129' FIAC)

3.

I! Standard Operating Procedure for investment inexchange Traded Fund (ETF) and liquid Mutual Fund(lMF). i,

An. agenda for the same Iwill be placed in upcoming I213th meeting of CST. I

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II

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The item was approved by the Committee. The same shall be... placed in the nextCBT meeting.

(Item no. s orizs» FIAC)

Concurrent Audit Reports of Provident Fund (includingother funds) and Pension Fund ror the months of.September, 2015 to March, 2016.

It was decided by the~members that from next FIAC aconsolidated Action taken on the observations made by.ECA shallbe placed as Agenda i:tem in the FIAC. The Audit Report neednot be sent by post to. members. The Report be placed in themeeting for reference:.if any needed at the time of deliberation .

The oeclslon of the 1

Committee has been taken Inote of for future Icompliance. . . I

I (Item no. 6 of 12sth FIAC)-: \ . .

• \ . ---f,selection . of •.Mutual Fund as ETF manufacturer for'• 1 . investment in ETFs by EPFO.. 15 ..• \ I FA & CAO suggested that the fot-lowing further criteria may be A separate agenda item:• t ... _ considered for inclusion in the draft RFP. on selection of "!ytu.~.I.i

•

'.r .~-----------------------------------j) The tracki:- i"\rrorcan be calculated usin<:.: t;·"

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~ I.e\~~~------------------~--------------------~~Proposal for increasing the number of days for borrowing

of funds from CBlO for participation in primary auctionsof Government Securities' and Corporate bonds fromexisting 15 to 30 days.

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An aqenda for the same Iwill be placed in upcoming !213th m~eting of CBT. ;

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tot;;' returil . fur:~-!(~ as ETF I

, manufacturer forinvestment in ETF's by.EPFO. is being placed.before 126th FIAC.

index.ii) The number of ETFclients both institutional & retauers. ,iii) The promoter company' international experience in ETFbusinessas ETFsin India is nascent. .

Mis CRISIL informed that with regard to point no (i)above, the provision has already been made in RFP at pointno.6.3.1.5. With regard to other two points CRISIL informedthat these are relevant observation and the Committee membersIagreed theycan include it in the RFPand CRISILwas directed to.update the RFP accordingly. With this modification theCommittee approved the RFP. Add!. Secretary stated that it is

. . Ian earlv stage of ETF investment and it yet to stabilise. He was'of the view that presently 581 may be allowed to be continued.

. JS & FA pointed out that SBr MF was selected as single sourceselection at initial stage with a clear. stipulation that their termwould be upto 31st: March 2016. This was subsequentlyextended to 30th June:2016 with the directions that process forselection of ETF rnanuracturer following the procedures shouldbe completed by that time.

The Chairma~ suggested. that since the CST has not.tndlcated the number of mutual fund to be selected as ETFmanufacturer, we may seek the approval of Central Board in thisregard in its next meeting. An agenda with regard to ~his bebrought before the next csr meeting. The approved RFPmaybe advertised. - •.

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Item no. 7of 1.2sti' FIAC)

The item was approved by the Committee. The same shall beplaced in the next CBTMeeting. .

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(Item no. 8of 1.2st" FIAC)

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[tern No-::3J-Rcvision of Service Charges on Collection by State Bank of India

The rates of service charges oncollection were last revised by Sal from Rs.3.00 perthousand rupees to Rs. 2.40 per thousand rupees for physical transactions (cheques) andRs. 1.80 per thousand rupees for transactions through. internet bunking(lNB). The abovecharges at reduced rates were implernented w.e.f 01.08.2014. The Central Board was alsoapprised of the same by way of an agenda item placed in 20~th meeting of t~~ CBT. EPF.

Since the above charges were still' on a higher side and were not in ;accordance withthe applicable rate prescribed by RBI for handling government business i.e. Rs.50/- 'forphysical transaction and Rs.12i-. for online transaction. the issue has been regularly raisedbefore the State Bank oflndia at different levels. SBl has been taking a vie,,~ that RBI's ratescannot be applied to EPFO since SBI does not consider EPFO as a par~ of governmerit.However, such a view point was contested by EPFO at various meetings. !

!SBI has now given their revised rates vide letter dated 24.05.2016 as *nder:

Before site to site integration I• Rs. 1001- per transaction for physical transaction !• Rs.3 S/~ per transaction for internet transaction !

I. I!

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(i)

(ii) After site. to site integration

• Rs.IOO/- per transaction for physical transaction• Rs. 12/- per transaction for internet transaction

(iii) v The revised collection charges at reduced rates would be effective fromretrospective date i.e, from the date of renewal of the agreement which is due from01.12.20(5.

SB1 vide letter dated 08.06.2016 has also waived the payme~tcharges as per RBI rateof 5.5 paisa per hundred rupees. EPFO has given its consent to the above revised rates ofservice charges. .

Savings to EPFO

The commission payable to SBl on existing rates and at revised/reduced rates istabulated below by taking the data' of April. 2016 for 5.87 lakh challans out of which 5.~5lakh challans were through internet banking and 62391 were through physical mode.

Tf.xi"ingRiiics Rs.2.40 per PrOPOSCdl{aii:S-iiCrore-SiiClo~p.rOPOScdRates aii~r site' lo--;ite;thousand for cheque and site integration Rs. I 001- per integration Rs.100/- per transactionRs.I.80 per thousand for transaction' for cheque and for cheque and Rs. I2/- perINS __ ~~.351- per.transaction for INS transaction for INB .' _. __....

•. .Rs.209.40 trorcs yearly Rs.~~:~2~~~~lX --'- __ ,__Rs.lS.04 crE~~..xE~FI)'I.. _. . Savin:. 180 ~rorcs. Savin,r: 194 crorcs __ "_.'.

The Agenda Item is placed lor kind information of the Board.

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Small & Medium Entorpri:lf$, a ;'i Coh:'ordt!1 eli/lIra, Madame C"m,);;;;>CS! f;;,i No ; 2. 111(:'170.1: ' (GO ,n '. ! .••

The Central Provident'Fund CommissionerEmoloyees Provident Fund OrganisationBha1vshy.:l Nlahr Bbawan-~: 8hlkaJ.Cama P:~lceNew Oelh,: ~1r) ~.:r:;1j

Da:c'

T8u/L& TPi 4'5'Daled24 05 20\6

SERVICE. CHARGES ON EPFO COLLECTIONS

'Nith further referwlce to our letter No SME/L& TP! 19; dated 09 12 2015 on thecapnoneo tccrc rr:rn.aes of tile meeting with EPFO held on 22 032016 at EPFO.Headquarter. New Delru and Stale Bank of India's valuable relationship withEP~O we have again reviewed service charges

2 In this connect-on. we refii:r to the clause Nos 5 10, 5 11 and 5 12 of the.f-\~reernent between Employees' Provicent Fund Organization and State BanI<. ofIn~_;'awith regard k:. the service charges payable. on EPFO collection and advisethe rev.sed rates i.l~.~nder· , .

"

• R:;, llYY· p~:.,transacuon for physrcat transactionRs 35!- cer .ransaction Iormternet transaction•

• Rs 1OOi· p~r transaction for phYSical transaction• Rs 1)..t- oer transaction for Intemel transacuon

ii:) tntroducno» of RBI rate of 5,5. paise per hundred rupees on paymentbusmess b~' EPFO after negotiations with E P F O.

"I! The>e'i!sec: collection charges rates would be effective from retrospective"~'It~:."~ r~").."th~ dale of renewal of agreement which IS (11 122015

c : '"<dte:: ii.;': Pens/or. Payments 'e ooth for Pension Payments of EPFOt-~:'l':-::;~:ce5 and P~!'~(,)r\ Pavments to Subscnoers of EPFO would. be

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"1 A:; declC:~(: :ju~lng th~ deliberations in the aforesaid meetIng for Site to Site!'1:l~~ra\i()r <:1Current Account has' been opened at .:JIJ( Bhikaji Cama Place::J.l:lch Nt::;\\' [)t:i:n ~or tnai purpose and Corporate Internet BanKing facility hasDee') orcvdec tc EPFO !11 thiS accoun: Vide our letter no SMEiL& TP/42 dalEtd0604 2016. we have requested E.P F O. to submit the forms duly completed a's'per the e-Commerce and m-Cornmerce policy of the Bank for integration 9f theweb-site of E P.F 0 with our INB anc request for submission of the sa'~e ,tocomplete the process of Site to Site Integration ;.

"

.!. ~nthe 1!(;I~lof the foregOing ',Nf: request consent by the appropriate authority inrespect Of :!v~· acove reviseo rates at the earliest to proceed anead with thee;.:ecutlOfl:.of the Agreements which has fallen due for renewal w.eJ 01.12.2015

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v ours fallhfLI!ly

Genera! Manager (TBU)

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.~1:"~~,,';;a~ 'fr.!. :m:!=I1);!Ilt~. :iili- 400 0:;:1~ ~ *" VI' ~ f.Nrrr. "''IJ ';!/l~:ro:! ~ fi1l!"'. ;#:/m: -e-:

! g.~:.~ ••~:')O '.1>f:{ :rt1:"';.";:;-; 1f:t. ,ill· 4(.lO 02~i I.~b;liti ~ T~nUC!lon i>rr)"l.:cl Ceo:.. S\lf 3l;$ln~ss :':1'111.':;')lI)\)r(ltot :re'"( :tr ;;.)("~S:a:e fi.l:1( c!"")"-i1 ','-a:::Hne Garrj qoa(j.tl\J:,~.· "?O~2~..

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The Central Provroeot Fund CommissionerEmployees Provioent Pund Organisation.8haivshya Nidhi Bnawan14 Bhikaji Carns PlaceNew Oelhi 110 066

NO.TBUlL& TP; S7Date. 08.06.2016

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Dear SIr. \

SERVICE CHARGES ON EPFO COLLECTIONS \

W;lh Iurtner reference 10 our leUer No TBUIL&TP/45 dated 24.05.2016 on t~e

caotionec tOPIC and ·:on~idenng OUf valued and .Iong standing relationship Wi'r

EPFO. we have once again reviewed conditions of the service charges \\\

2.ln this ccnnectton. we refer to the clause Nos 510. 5. i 1 and 5.12 of lh~.Agreement between Employees' Provident Fund Organisation and State Bank of

India wltb regard to ihe service charges payable on EPFO collection and advise

that the appropriate authority has since waived theconditton occurring in

para 2(iii) of the atorasaid letter i.a "Introduction of RBI rate of 5.5 paise per

hundred rupees on payment business by E~FO after negotiations with EPFO" .

which stands waived

3. In the light of tne foregoing. we request acceptance by the authonseo autnonty

of EP~O for the revrsed service charges advised vide our letter no TBUiL& TP/45

dated 24.05.2016 and the aforesaid condition waived 10 proceed ahead with

execuuoo of the. Agre.3menl which has fallen due fOl renewai w.ef 01 12.2015

Yours faithfully .

\. ' . .•...•.-For Ge!J.~ancrg-errTBU)

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Item No,y";- Proposal for: amendment in El)F Scheme, 1952 for engaging PrivateSector Banks- \CICI Bunk, HD~~C Bank and Axis Bunk- i'n addition toSBl and other Nationalized Banks for collection of contributions.

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Para 48 of'the Employees' provident Funds Scheme. \95,2 provides that theCommissioner shall deposit the contri'butions received from the employers, electronicallythrough internet banking or any other mode other than internet banking (cheques anddrafts). in the Reserve Bank or the State Bank of India or any other Nationalized Banksor through PayGovplatform authorized for collection in the Current Account of the Fund.

2. Currently. an nationalized banks and three private sector banks viz. lCICI Bank.HDFC Bank and' Axis Bank have been authorized by the Ministry of Finance,Government of India to collect taxes on behalf of Income Tax, Customs. Excise &Service Tax Departments. At present. it is possible for employers to pay statutoryprovident fund contributions through the payment aggregator- Bill Desk as well as directonline payments through SBI. The collections received through the payment aggregator isindirect. settlements are done in T+ ~ days' and at times leads to reconciliation issues.However, the collections received through internet banking e.g, SBl arc direct. seamless,efficient and the contributions are received in T+ I day: The Reserve Bank of India videits circular No. RBU2011-1~/377 dated 3151 January, 2012 has also reviewed their.policythat in addition to ICICI Bank, HOFC Bank and Axis Sank all private sector banks maybe considered eligible to handle any central or state government business at par withpublic sector banks with a view to enhance the quality of customer service inGovernment business through more competition, improving customer convenience byincreasing' the number of customer service outlets' and broad basing the' revenuecollection and payments mechanism of Governments',

J. In order to collect. contributions efficiently and to providehassle free service to theestablishments. EPFQ may authorize three private sector banks - lCtCI Bank, HDFCBank and Axis Bank· in addition to SBt. any other nationalized bank and throughPayGov platform. f~r collection of EPFO contributions. Such a step would cut down float~vajlable with the payment aggregator by two days and would lead to an earning of Rs,L5crores annually for ~PFO. Nearly 25% of total collections is received through these threeprivate see lor banks;

4. It has been an endeavour of EPFO to accredit more and more banks for collectionof dues as part of "Ease of doing business" and to collect such dues through the internet.Similarly. it has been a consistent policy to electronically credit money to beneficiaries inwhich so ever bank that a subscriber may have opened his bank account. Such paymentsare made through RBl's NEFT platform or through the Core Banking Solutions (CBS) ofthe State Bank of India. As more and more banks arc associated with EPFO, it shall be

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possibl-. t :<.~mlcssly credit ;):~yn'::;T\S to ~\,. .cribers u;;;.nl;? the CBS of the respectivebanks. Such payments would be more efficient and would improve service delivery to theEPF subscribers. .

•5. The existing provisions under para 38( 1) and para ~8 of EPF Scheme. 1952 wouldbe required to be amended by the Government to add private banks- ICICI Bank, HDFCBanks and Axis Bank- for collection of EPF dues as well as to provide for an enabling. ~provision for authorizing other private sector banks in future,

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6. The Central Board of Trustees, EPF may approve suitable amendments in para38( I) and ParaA8: of the Employees' Provident Funds Scheme, 1952 to enable EPF~ tocollect contributions through three private banks- ICICI Bank, HDFC Bank and AxisBank- in addition to SB!. any other nationalized banks and through PayGov platform.

Proposal: ' The :FIAC may recommend to the CBT, EPF for suitable amendmentsin Para 38(1) and Para 48 of the Employees' Provident Funds Scheme,1952 to enable ~PFO to receive contributlons through private sectorbanks in addition to SBI, other Nationalized Banks and throughPayGov platform .

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AMENDMENT PROPOSED IN THE EPF SCHEME, 1952---1r SI. I

I Noz.; !Existing Paragraph Proposed Paragraph

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I I .I I 138. l\1ode of payment of contributions.. !

( I) The employer shall, before paying the member his wages (I) The employer shall, before paying the member his wages inin' respect of any period or part of period for which respect of any period or part of period for which contribution arc

! contribution arc payable, deduct the employee's contribution payable, deduct the, employee's contribution front his wages1 from his wages which together with his own contribution as. which together with his own ' contribution as well' as an./ well as an administrative charge of such percentage of the pay administrative charge of such percentage of the pay (basic.i (basic wages, dearness allowance, retaining allowance,if any, ":ages, dearness allowance, retaining allowance, if any, 'and cashi and cash value of food concessions admissible thereon) for the value of food concessions admissible thereon) for the time beingI lime being payable to the employees other than excluded payable to the employees other than excluded employee and inemployee and in respect of which provident fund contribution respect of'which provident fund contribution are payable, as the

'11arc payable, as the Central Government may fix, He shall Centra! Government may fix, He shall within fifteen days of the.within fifteen days of the close ofevery month pay the same close of every month pay the same to the fund electronic through! to the :und electronic tl~rou~ internet banking of Slate Bank linternet banking of State Bank of India or any other Nationalizedf of. India or other Nationalized Bank or through PayGov Bank or through PayOov Platform or private sector banks as mayj Platform authorized for collection on account of contributions be authorized by the Central Government for collection on1and administrative charge, account of contributions and administrative charge.IProvided that the Central Provident Fund Commissioner may· Provided that the Central Provident fund Commissioner may lor iI for reasons to be recorded i~ writing, a,IlO\~any employer o{ -reasons'to··be·'ieco~ae(nn\i/i"it,ii'tg;:·all(jw·anY'cmployeror class of r, class of employer to deposit the contributions by any other employer to deposit the contributions by any other mode other iImode other than intcrnet banking, thanintcmet bankin , ;.- . ~

-38.Mode of payment of contributions,....•

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Para~raph 48: Cu~re~t Accoun.t ~ T~eConunlssioner sh3il rPara~raph 48: Cu~re~(j\ccoun~ - The Commissioner sh;T'ldeposit vthe contributions received from the employers Ideposit the contnbutl~ received from the employers i

eleclronical.Jy through i~te~ct banking or any other mode Ie1ect~onicaUy thro~gh .in~~ftct banking orany other mode OdL?',!other than m~emet banking in the. Res:rve Bank or the State I tha~ Internet ban~tng "' ~F Reserve Bank or the State Bank ., iBank ',of ,India '" any othel", Nationalized Bank or through /' India or other NatlOl1ahZ~~b,Ilankor through PayGov Platform "T :

PayGov Platform intheCurrent Account of the Fund. " private sector banks as-tmay be authorized by the Central i. j Government in the Currentnccount of the j;'und. _.J

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• 121'" m!!etln9. of me: 27,Qi,2016Item No.5: SelegiQ;j'·· of Asset Managemgnt CompClDies as fiE

manuta.cturer fot investment in EIFJ b't epfQ...,1. The Central Board in its 208th Meeting held on 16/09/2015 had approved

selection of SaI mutual Fund as ETFmanufacturer for investment in ETFbyEPFO.It nad considered the fact that to begin with investment in ETF canstart with Asset Management Companies(AMCs)under Public Sector. AmongPSUsthere were only two asset management companies namety SBi MutualFund and UTI mutual fund. Since at that point in time only Sat mutual fundhad m on Nifty 50 and Sensex, EPFOstarted investing in ElF through S8tMutual Fund.

2. The tenure of investment with S6! Mutual fund was initially till 31st March2016, which was later extended tin 30th June 2016 till the appointment ofAssetManagement Companies.

3. In pursuance to the decision of 123rd ·RAe and 212th Central Board, theRequest for Proposal (RPF) for Selection of ASset Management Companiesfor EPFO'sInvestments in ExchangeTraded Funds(ETFs) was advertised on03rd June 2016,

4. In the 12stn RAe held on 24.05.2016 it was decided that since the cer hasnot indicated the number of mutual fund to .be selected as ETFmanufacturer, the same may be sought' from the Central Board in its nextmeeting.

5. Now, considering the fact that ETF market in India is stili considerednascent, it has been thought prudent to evaluate the size and expense.ratioof both the permissible Nifty 50 and SensexETFswhich are In' the market bydifferent AMCswith the purpose of considering fe~sibility of selecting AMCswith majority ownership under PublicSector for Investment in ETFsby EPFO.

6. The total size of such equity ms is approximately 12,000/- crores till March,20t6. The following AMCshave Assetsunder management (AUM) of notlessthan Rs 15,000 crores under equity mutual funds as on March, 2016 and alsohave both the Nifty 50 and SensexETFs::- -.

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•• May 2016 -Month-end AUM (In Rs Cr)Sr. Eligible AMesNo.c •

. , NlftyETF Sense)( ElF

1: • 44.17 2.11. HOFC Mutual Fund100 Prudential Mutual 534.90 5.212 Fund

3 Reliance Mutual Fund 25.04 39.81

4 un Mutual Fund 102.19 14.22~..

5 581 Mutual Fund 7066.96 2054.42

6 Kotak Mahindra Mutual Fund 330.37 10.93

From the above table it is evident that apart from S6t Mutual Fund none ofthe AMCs have :slzeabte corpus in ETFsof NIfty SO and Sensex. Even for S8tMutual Fund approximately 7,000 crores belongs to EPFO out of a total of9,100 crores•

The expense ratio of these ETFs are as under:7.

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Sr. Eligible AMes Exoense Ratio (as on Mav 2016)No. Ni~ieTF Sensex ETF

1 HDFC.Mutuai Fund 0.05% O.ose.

2 100 Prudential Mutual FuPld 0.05% 0.08%

3 Rel1ance Mutual Fund 0.08% 0.07%

4 un Mutual Fund 0.07% 0.01%

5 S8t Mutual Fund 0.07% 0.070/0

6 Kotak Mahlndra Mutual Fund 0.1~ 0.25%

The table suggests that for Sensex m the expense ratio for the AMes withmajority ownership under Public Sector i.e. S61 Mutual Fund and UTI Mutual

Fund have the lowest expense ratio @.07%• For Nifty 50 ETF the expense

ratio of un mutual Fund is at par with S8l MutuaL.Fund @.07% with which

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EPFQ is currently making investments. This Is however slightly higher than

HOFCmutual Fund and ICICI Prudential Mutual Fund which Is @ .05% ..:. :

8. Cdnsldertng the fact ETFs as an Investment vehicle are relatively nascent inthe Indian market it would be prudent to invest only with AMCs with majority

ownership under Public Sector rather than expanding the investment

uniVerse to all other AMCs as was decided by the Central Board when for the, ~....

first time investment In ETF was allowed. It is also Important to me'naon that

the expense ratio for Sensex ETF is already the lowest for the two Public

sector managed AMCs i.e. SBI Mutual Fund and UTI Mutual Fund.

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Proposal:

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A. Selection of Asset Management Companies with majority ownership under

Public Sector i.e. S8I MutuatFund (63b/c:i stake. by State Ba"1k of India and

37% stake by Amundl India holding) and UTI Mutual Fund (18.290/0 each

stake by' State Bank of India, Ufe Insurance Corporation of India, Bank of

Baroda and Punjab· National Bank and 260/0 stake by T. Rowe Price) for,

Investment in ETFs by EPFO. Further the committee Constituted In ~e 123rd

RAe for selection of' Mutual Fund/AsSet Management compani~ as 'ETF

manufacturer tor' investment in ETFs by EPFO may negotiate the \expense

ratio with these AMCs. I

B. The Process for selection of Asset management companies through the

biddIng process which was advertised may be terminated .

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