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EPF to finalise adviser today

New Delhi, Dec. 2: The trustees of the country’s largest pension fund, Employees Provident Fund (EPF), will hold a meeting tomorrow to appoint a financial adviser for the fund. Investments by the fund is crucial as it secures returns for the elderly, who form close to 10 per cent of the country’s billion plus population and rely almost entirely on interest income in the absence of a social security net.

Sources said the trustees have shortlisted seven financial consultants, including Price WaterhouseCoopers and KPMG, which would aid in investment decisions. The meeting would be chaired by labour minister Sahib Singh Verma, they added.

The move to hire a global consultant major assumes significance on the back of the Reserve Bank of India’s soft rate policy forcing the finance ministry to ask for a cut in the interest rate offered to its subscribers in line with the low rate regime.

The central bank has lowered the bank rate — which banks use to price loans — at a three-decade low of 6 per cent in a bid to accelerate industrial recovery in Asia’s third-largest economy.

However, the trustees have been resisting moves to lower rates as a rate cut would be politically unpopular. Analysts, however, said a higher return on this scheme leads to a mismatch in the overall interest rate structure. The rates offered to subscribers would be crucial as the middle-class forms the main support base for the ruling Bhartiya Janata Party (BJP), which can ensure success for the party in the 2004 general elections.

“That they are hiring a financial adviser reflects the trustees desire to hold on to the same rates of 9.5 per cent which it can hope to achieve only by maximising the returns on the investments,” said an analyst.

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