EMPLOYEES' PROVIDENT FUND C!>RGANISATION · employees' provident fund c!>rganisation newdelhi...

EMPLOYEES' PROVIDENT FUND C!>RGANISATIONNEW DELHI

FINANCE AND INVESTMENT COMMI1"fEE[CENTRAL BOARD OF TRUSTEES, EMPLOYEES' PROVIDENT FUND]

63rd Meeting of the

on16TH AU6UST,2001 AT 12.80 P.M~

VENUE Conference Room,ICSIR Building,!RafiMarg,iNew Delhi - 110 001

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. !EMPLOYEES' PROVIDENT FUND O~GANISAnON

(Ministryof Labour,Govt.~f India)\ Head Office i

Bhavishya Nidhi Bhawan, 14, Bhikaiji Cama Place,New Delhi -110066/

\,Dated: 03.08.2001No. Invest.I/l(15}96/63rd Meeting/Vol.lI!

To

All the membersFinance & Investment Committee,Employees' Provident Fund Organisation

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Sub: Holding of the 63rd meeting of the Fi.,ance 8&. InvestmentCommittee, Employees' Provident Fund ~rganisation.

Sir,

The 63rdmeeting of the Finance & Investment Committee, Employees' ProvIdentFund Organisation will be held on 16.8.2001 at 12.30 p.rn, in the Conference Room,CSIR Building, Rafi Marg, New Delhi - 110 001. I

2. Memorandum of the meeting is enclosed.

(. :' Encl: As above.

Yours faithfully,

(K. L. TANEJA)REGIONAL PROVIDENT FUND COM.,ISSIONER (INVeSTMENT)

Copy to : -

1.2.3.4.5.6.

PS to Secy., Government of India,Ministry of tabour, New Delhi.PS to FA (labour), Government of India, MinistrY of labour, New Delhi.PS to Dir. (Finance), Government of India, Ministry of Labour, New Delhi,.PS to Central Provident Fund Cornrrussloner !Regional Provident Fund commissioner (Confere~ce), Central Office,New Delhi. !Shri Hemant Contractor, DGM, 581, Madam cama Road, Mumbai - 400021.

(K.L.TANEJA)REGIONAL PROVIDENT FUND COM~ISSIONER (INVESTM/ENT)

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CONTENTS

Description Page No.

connrmanon of the Minutes 'of the 62rljd Meeting of theFinance and Investment Committee held at New Delhi.

Statement showing the action taken on therecommendations' of the committee

1

2-4

3. Review of Investments in respect of Provident Fund. 5-10

4. Review of Investments in respect of Pension Fund. 11-18

5. Review of Investments in respect of EDLI Fund. 19-24

6. Action taken report in respect of discussion held between 25-45representative of CBT, EPF and SBI (PMS) at the StateBank of India Building, Mumbai on 30.5.2001.

7.

8.

9.

10:

c: 11.

Issues raised by the Actuary and Portfolio Auditors in their 46-58Reports

Exposure limits - A representation from ICICI Ltd. 59-60

Review of Investment pattern 61-77

Status Report on 16% HMT Bonds, Face Value of Rs. 25 78-87crore - Non payment of outstanding interest and principal

Any other item with the permission of the Chair

C:IF&I meeting 53_10.8.01I1tem 53.doc

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Item No.1: Confirmation of the minutes of the 8rt meeting of the Finance& Invesbnent Committee held at New Pelhi.

The draft minutes' of the 62nd meeting of Finance & Investment CommitteeI

held at New Delhi on,25.05.2001 were circulated to all members of the Committee,

vide letter No. Invst1l1(15)2001/62nd meeting/3848-sa dated 31st May 2001.I

No comments have been received so far.

The committee may, therefore, confirm the minutejS of the 82nd meeting.

C:IF&I meeting 53 _10.8.01I1tem 53.doc

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Item no. 2: Statement showing the action taken on the recommendations ofthe committee !

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SI. No.

1.Recommendations

Liberalisation of InvestmentGuidelines:SBI is to make presentation before theCBT in its meeting scheduled to beheld on 23MMarch 2001.

Action Taken,

SBI jwas requested to make a presentationbefore the Central Board of Trustees on 23.032001~ut Central Board of Trustees did notdeh~e on this issue and decided to take upthe issue in next meeting.

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Outstanding interest and maturityproceeds.

Subsequent to bifurcation of UP, Bihar& MP, three new states namely:Uttaranchat, Jbarkhand & Chhattisgarhwere formed. Payment obligations tobe ascertained on investments in SDLof erstwhile UP, Bihar & MPGovernments.

Details are placed in Annexure 'A'.

Exposure of Central Board of Trustees, EPFin tqe erstwhile UP, Bihar & MP as on30.06.2001 was as under:-

AccduntEPF'EPSI;DU

MP135.01155.672.34

(Rs. in crores)UP359.15304.168.30

BR299.23192.656.33

293.02 671.51498.•21

SBI has taken up the matter with RBtregarding service of debt of erstwhile thrci€states. Information about Iiabi1ities of eaelerstwhile state after bifurcation is yet to. beknown. The RBI has informed that obligatioJof newly formed states is being worked ouand tF same will be informed in due course.

4

5

Appointment of portfolio auditor for Bhadra & Co., Chartered Accountants havthe year 2001-02 been I further appointed as Portfolio Audito

I

for the year .2001-02.I

Arrangement of transfer of fundsthrough SBI - 'STEPS' from linkbranch to investment account should beintroduced at the earliest. hi the secondstage, same can be introduced fortransfer from base branches also as andwhen the said facilities are available atlarge number of base branches.

List .of 525 branches where 'STEPS' facilitis available, has been collected and it is founthat in 55 link branches where from funds 81

~ to investment accounts, 'STEP~facilitY is yet to be introduced. Matter mbeen'taken up with SBI to provide the same.

6 Issues raised by the Portfolio Auditors.

C:\F&I meeting 63_10.8.01/1tem 63.doc

Separate item is placed in this regard.

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7 After reconciliation of POTD account, It was asked to State Bank of India toportfolio auditors stated that there is a reconc ~e the porn accounts and submit thedi:tference of Rs.36,OOO/-which might requisi11e report vide letter no. Invest.I11have been eocashed, It was decided (Actior taken)98/12586 dated 4th June 2001that State Bank of India may be asked but the same is awaited.to locate the encashment position for

\Rs.36,OOO/-,' it the same could not belocated, the matter may be placedbefore the Finance & InvestmentCommittee 'again.

Regarding Investment Fluctuation Repo~ of Bhadra & Co. regarding Investment .Account, Portfolio Auditors suggested Fluctuftion Account has been given to MIschanges in the existing accounting Sie=fn Information Systems Limited, thepolicies of the Organisation. It was co ts for consideration.decided that organisation is going forre-engineering of its business processand retooling of accounting system.This would involve comprehensivereview of accounting system- andprocess by an appointed consultant.The report of Bhadra & Co. regarding i

investment fluctuation account mayalso be considered by the consultant.

9 Opening of DEMAT Account. It was An it,m indicating the financial implicationsdecided that financial implications of to open DEMAT Account with NSDL wasI)EMAT account should be specified circulated amongst the members of Finance &by the State Bank of India for taking Investlment Committee and the same wasany decision of the issue. However, approjed, State Bank of India was advised tokeeping in view the importance of the open ~ DEMAT Account and intimate thematter approval of the Committee may account 00. to this office but the same IIbe taken by circulation of a proposalinclusive of detailed financialimplications.

C:\F&Imeeting 6UO.S.01/ltem 63.doc

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L 6/30 11.50n1PSEl'I 2010 III) MAIN Ale 34,000.00 1,955.00 26/01i/00 4TH RBHIND!R SB~ OH 17/1/2001, 1/8/2001

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1 6*1)0 11.50\ OPSE! 2010 KAlN Ale .34,000.00 l,!tS5.00 26/6/?OOO TEL!!" 121'112001, 1/8/2001

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Item No.3: Review of Investments in respeqt of Provident Fund

The details of fu~d inflow and investments ~de by SBI according. to the

prescribed pattern are as follows: - '

2001-2002 (April'2001-June 2001) ~Flgul'!Sin RupeesCrores}Provident Fund

MONEY RECEIVED INVESTMeNTS MADEI

SOURCE AMOUNT .CATEGOR~ AMOUNT

Opening Balance 1.03 Central IGovt. 244.22I

Securities.

Net Accretions 221.47 Govt. Guararteed 24.79Securities

,

Maturities State Develo~ment 150.36Loan

- T Bills 45.27 PSUIPSFI 262.61- Other Securities 224.14 Current Account 67.60Interest 344.71 T-Sills , 45.22Refund of Application 3.38 Misce. Payments! 45.21Money &. interestthereon

Other receipts 0.01

Total 840.01 Total 840.01

)0 Deviation from the required pattern as on 30.~.2001-

1. CentralGovt. Securities -15.63

2. State Govt.& GuaranteedSecurities -10.10)

3. PSUIPSFI -29.82

4. Residual -10.98

5. CurrentAccount S1.S0

S. T-Bills -Q.05

C:IF&I meeting 63_10.8.01ntem 63.doc

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> The cumulative picture of holding of CBT EPF is indifated below-

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, 31.03.98 31.03.99 31.03~00 31.03.2001 30.06.2001

1 Central Govt. 1472.15 2069.97 274rJ.Ol 3801.46 3965.32Securities I

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2(a) State Govt. 117.8.43 1423.10 173~.12 2068.86 2203.45

(b) Govt. 625.61 578.24 6~7.40 847.79 824.01Guaranteed !

Securities

3. Special 30844.28 34586.03 38773.06 43145.65 43166.09DepositScheme ,

4 Public Sector 1476.56 2652.15 3820.46 4540.90 4663.57FinancialInstitutions

Tgtill 35597.50 41309.57 47706.13 54404.66 54822.44

> Details above investments made in vari~ scripts pertaining to each

category i.e. Central Govt Securities, State iGovt. Securities and PSU I

PSFI during April-June 2001 are enclosed.

> The details· showing the total holding as on 30.06.2001, tt"!eactual interest

receivable on these investments and the yield thereof are given below: -

(i) Holding as on 30.06.2001 Rs.54,822.44 cr.

(ii) Interest receivable

(iii) Yield

Rs. 5,551.53 cr.

10.13 %

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INVESTMENTS DURING 2001-02 UP TO JUNE-01PF MAIN ACCOUNT Annemre to Item No.3

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INVESTMENTS DURING 2001-02 UP TO JUNE-01PF MAIN ACCOUNT AnneKUIe to Item No.3

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Sr. Date of Security Coupon Face Price Accrud. A ttual Brief Pi rticualns of .No. Investment Invested (% p.a.l Value Interest I••" IHI ••••• IL Issuer Rate YTM

(%) (%p.a.)1 2 3 4 5 6 7 8 9 10 111 2MPr-01 T-BILLS· 0.00% 0.630 0.629 0.000 ( .629 RBI 99.866% 7.00%2 ~-O1 T-BILLS· 0.00% 5.040 5.039 0.000 !.039 RBI 99.984% 6,02%3 18-May-01T-BlLLS· 0.00% 3.750 ' 3.747 0.000 .747 RBI 99.923% 7.00%4 ~......n1 T-BILLS· 0.00% 22.600 22.578 0.000 22.578 RBI 99.902% 7.20%5 23-May-01T-BILLS· 0.00% 0.750 0.749 0.000 J.749 RBI 99.840% 7.30%6 2';:u-..n1 T-BILLS· 0.00% 5.000 4.994 0.000 ".994 RBI 99.888% 6.80%

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Item No.4: Review of Investments in resfect of Pension Fund

The details of funds inflow and investments made by $aI are as follOws: -

ACCOUNTNUMBER-~l: I2001-2002 CAprilf2oo1-June 2001) I CBgures in Rupees Crores)

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SOURCE AMOUNT CATEGORl AMOUNTI

Opening Balance 6.04 Central Govt.' See~rities 415.69

Net Accretions 592.74 Govt. Guarcnteed 57.29Securities I

JMaturities State Development 165.48

loan 1--- T Bills 37.46 PSU/PSFI· ! 429.69

- Other Securities 70.00 Current ~ccount I 35.20

Interest 429.14 T-Bills I 37.59·i

Refund of Application 5.54Money & interest I

thereon

Other receipts 0.02 ,,I

Total 1140.94 Total I 1140.94 .I

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~ Deviation from the required pattern as on 30.06.2001I

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13.20

CentralGovt. Securities

State Govt. & Guaranteed Securities

PSU/PSFII

-2!.66

-1.833~.20

p.13

Residual

Current Account

T-Bills

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~ The rumulatlve picture of holding of csr EPF1indICated below

, (Fiaures in Ruoees Crores)\

As On -~ 31.03.99 31.03. 2000 31.03.2001 30.06.20011. Central Government Securities 2142.90 3~23.n 4753.45 5118.16

2(a) State Govt. 963.31 1l149.07 1887.68 2039.15

(b) Government Guaranteed 303.50 ~146.50 551.36 606.38Securities " .

3. Special Deposit Scheme 894.84 l(103.65 1117.09 1117.09

4(a) Public Sector Financial 4330.75 6.~6.84 7842.62 8181.45Institutions I

Total 8635.30 ~22j1!».78 16152.20 17062.23I

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)0 Holding of CST EPF in Public Account in ~ Pension Fund is indicated

below-

(Figures in Rypees Croresl

(1) As on 10674..83 (2) As.,n 11939.6101.04..1997 01.044998GOvt. Contribution 370.49 Govt. C<>ntribution 437.10Interest: 894.29 Interest 1004.37

Balance in Public 11939~61 Balance in Public 13381.08A/cason A/c as Ion31.03.1998 31.03. ~999(3) As on 13381.08 (4) As ~n 15160.3501.04.1999 31.03. ~OOOGovt. Contribution 560.00 Govt. 0:>ntributlon 590.00Interest 1219.27 Interest 1313.84

Balance in Public 15160.35 Balanqe in Public 17064.19A/cason A/cas~n31.03.2000 ~1.03. 001

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)0 Details about investments made in varioyS scripts pertaining to each

category i.e. Central Govt. securities, Stat~ Govt. Securities and PSU II .

PSA during April-June 2001 are enclosed. I

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investments and the yield thereof are given belf>w:-

(i) Holding as on 60.06.2001 Rs.17062.24 cr.


(iii) Yield

Rs. 2126.96 a.

12.470/0

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Sr. Date of Security Coupon Face Price Accrud. Actual Brief particualrs of securityNo. Investment Invested .(%-.I).a.1 Value Interest It~ent Issuer Rate YTM

\ _l%) l%p.a.)1 2 3 4 5 6 7 8 9 10 1154 23-.1un-01 GS 2018" 12.60% 1.750 2.078 0.018 2.096 RBI 118.750% 10.26%55 26-Jun-01 GS2018* . 12.60% 16.478 19.608 0.190 19.799 RBI 119.000% 10.24%56 28-Jun-01 GS2018* 12.60% 11.203 13.359 0.137 13.496 RBI 119.250% 10.21%57 29-Jun-01 GS2020* 11.60% 11.500 12.989 0.007 12.997 RBI 112.950% 10.07%58 29-Jun-01 GS2020* 11.60% 2.270- 2.564- 0.001 2.565 RBI 112.950% 10.07%

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CATEGORY -> PSUIPSFI

Annexure to Itsm No.4

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Sr. Date of Security Coupon Face Price AccnId. Actual Brief particualrs of securityNo. Investment Invested (% p.a.) Value Interest Ilwstment Issuer Rate YTM

(%, (%p.a.'1 2 3 4 5 6 7 8 9 10 111 19-Apr-01 T-BILLS" 0.00% 3.571 3.563 0.000 3.563 RBI 99.790% 7.00%2 2CMpr-01 T-BILLS· 0.00% 3.460 3.453 0.000 3.453 RBI 99.809% 7.00%3 28-Apr-01 T-BILLS· O~OO% 0.010 0.010 0.000 0.010 RBI 99.866% 7.00%4 4-May-()1 T-BILLS· 0.00% 9.960 9.958 0.000 9.958 RBI 99.984% 6.02%5 1Q-May-01 T-BILLS· 0.00% 0.460 0.460 0.000 0.460 RBI 99.~ 7.00%6 2 1 T-BILLS· 0.00% 8.250 8.237 0.000 8.237 RBI 99.840% 7.30%7 26-May-01 T-BILLS* 0.00% 20;000 19.980 0.000 19.980 RBI 99.915% 6.25%8 23-Jun-01 T-BILLS· 0.00% 0.168 0.167 0.000 0.167 RBI 99.807% 7.05%

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Item No.5: Review of Invesbnents in resl IN!ct of EDU Fund

The details of fund inflow & investments n~ade by SBI in res\,

Insurance Fund are as follows:-

ACCOUNTNUMBER -25:

lOO1-2lm2 (ADriI'2lm1-lyne 2gg1} '1:1_ •• _, in D •• __ ;1EDUFund

MONEY RECEIVED INVESTM ~NTSMADE

SOURCE AMOUNT CATEGOR' AMOUNT

Opening Balance 0.37 Central Govt. See~rities 14.39

Net Accretions 26.70 Govt. Guarcnteed 1.92

Securities

Maturities State Develobment 5.36,

Loan

-T Bills 2.29 PSU/PSFI , 14.69!

- Other Securities 0.00 Current Account I 1.30

Interest 10.52 T-Bills , 2.29

Refund of Application '.-0.07

Money & interestthereon

Other receipts 0.00

Total 39.95 Total 39.95

~ Deviation from the required pattern as on 30.1~.2001

1. Central Govt. Securities - ~.452. State Govt. & Guaranteed Securities ~.40

3. PSUIPSFI - P.614. Residual - 0.265. Current Account 1.30

pect of

5. T-Bills o.oo,

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~ The cumulative picture of holding of CST EPFis 'ndicated below

AsOn-~ \ 31.03.99 31.03.2000 31.03 2001 30.06.2001

1. Central Government 40.08 68.80 ~16.76 129.42Securities :

2(a) StateGovt.: 22.18 33.21 48.90 53.81

(b) Government 7.50 12.75 20.86 22.74GuaranteedSecurities

3. Special Deposit 1.59 1.85 2.08 2.08Scheme

4(a) Public Sector 84.40 143.85 197.20 211.19FinancialInstitutions

Total 155.75 260.46 385.80 419.24

~ Holding of CST EPFin Public Account in the Pension Fund is indicated below-

(1) As on 01.04.1997 1730.77 (2) As onl01.04.1998 1873.83I

Interest 143.06 Interest i 158.82Balancein PublicAle 1873.83 Balanceip PublicNc 2032.65as on 31.03.1998 ason 31. 03.1999

(3) As on 01.04.1999 2032.65 (4) As 0" 31.03.2000 2205.42I

Interest 172.77 Inter-est , 191.74I

Balancein PublicAle 2205.42 Balance ~nPublic Ale 2397.16as on 31.03.2000 as on 31~03.2001

Details above investments made in various scrip s pertaining to each category

i.e. Central Govt, Securities. State Govt. Securities nd PSU I PSFI during April-

June 2001 are enclosed.

~ The details showing the total holding (Investm nt Account other than Public

Account) as on 30.06.2001. the actual itterest receivable on these

investments and the yield thereof are given bqlow: -

(i) Holding as on 30.06.2001 Rs.419.24 cr.


(iii) Yield

Rs. 51.57 cr.

12.30 %

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INVESTMENTS DURING 2001-02 UP TO JUNE-01. EDU FUND ACCOUNT

CATEGORY -> CGS

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INVESTMENTS DURING 2001-02 UP TO JUNE-01EDU FUND ACCOUNT Annexure to Item No.5

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.C CATEGORY -> SGSC 'D-""'=Sr-. -r---=Date:-:--of-:--r-Security=----::::·~""'r-:Coupo~-n~-:F:-ace---r-:P=-rice-:----r-:Accrud--..-r--:-+:AI.:tua:--":II---r--:B:-:ri-::ef:-'pa-Irti-:::-cual--:-rs--:of:-sec-:urity-::·~

No. Investment Invested (% p.a.) Value Interest I Issuer Rate YTM

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(%) (%p.a.)2 3 4 \. 5 6 7 8 9 10 11

4-Apr-01WB SOL 11· 12.00% 0.250 0.270 0.000 0270 RBI 108.080% 10.70%12 12.J\pr-01 KERSOL 10· 11.75% 0.190 0.203 0.003 0206 RBI 106.900% 10.57%3 1a.Apr-01 APSOL 11* 11.50% 0.490 0.518 0.016 0534 RBI 105.800% 10.55%

1:Mpr-01 KERSDL 11· 10.53% 0.990 0.993 0:000 0993 RBI 100.300% 10.48%42&Apr-01 SAIL2008* 11.30% 0.780 0.796 0.011 0807 SAIL 102.107% 10.71%526-Apr-01 SAIL200s· 11.30% 0.300

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SAIL 102.105% 10]1%RBI 106.730% 10.35%

627-Apr-01AP SOL 10· 11.50%

0.7000.100

0.7650.100

0.0060.000

RBI 109.350% 10.50%'RBI 100.000% 10.35%

10 RBI 100.000% 10.35%

73().Apr;-01KERSOL 11·0..... APSOL 11

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0.1000.070

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0.0900.013

0.0900.073

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RBI 100.000% 10.35%RBI 100.000% 10.35%RBI 100.000% 10.35%

14 RBI 111.200% 10.31%-

1 KARSOL 11~-O1 MAHSOL 11au. 1 TN SOL 11

10.35%10.35%

1.250 1.390 0.Q15 1.40515

?R. u•••-t\4 AP SOL 09* 12.25%0.590 0.640 0.030 (].~ RBI 108.400% 9.97%

1631-May-01MP SOL09* 11.50%

0.005 0.005 0.000 (1.005 RBI 104.050% 9.87%17

25-Jun-01 J(ER.SDL11* 10.53%0.800 0.800 0.000 (.800 SAIL 100.000% 11.()Q%11.00%

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INVESTMENTS DURING 2001-02 UP TO JUNE-01EDU FUND ACCOUNT Annexure to Item No.5

CATEGORY --> PSUI PSFI

Sr. Date of Security Coupon Face Price AccrucL Actual Brief particualrs of securityNo. Investment Invested (% p.a.) Value Interest Ir.,stment Issuer Rate YTM

(%) (%p.a.)1 2 3 4\ 5 6 7 8 9 10 111 9-APr-01 NCRPB07 10.85% 1.990 1.990 0.000 1.990 NCRPB 100.000% 10.91%2 17~-O1 $BI05* 10.80% 0.780 0.787 0.024 0.812 SBI 100.939% 10.7~3 21-Apr-01 PfC2()08* 11.30%' 0.350 0.357 0.011 0.368 PFC 102.001% 10.71%4 23-Apr-01 SBI05- 10.80% 0.700 0.711 0.023 0.73'\ SBI 101.5100.4 10.60%5 24-Apr-01 SB105* 10.80% 0.500 0.508 0.017 0.525 SBI 101.670% 10.55%6 27-Apr-01 8012007* 11.95% 0.150 0.157 0.001 0.158 BOI 104.815% 10.81%7 ~ ...•. n1 NPC2006* 10.75% 2.000 2.028 0.019 2.048 NPC 101.424% 10.30%8 0_'••••'-"1 IOFC2006* 10.80% 2.140 2.199 0.077 2.276 IDFC 102.757% 10.30%9 9-May-01 IOFC 2006* 10.80% 0.010 0.010 0.000 0.011 IDFC 102.757% 10.30%10 17-M~ay-01IRFC06* 10.90% 0.120 0.123 0.002 0.125 IRFC 102.362% 10.30%11 31-tVJCIY"'UCANARA07* 11.95% 2.000 2.152 0.110 2.262 CANARA 107.588% '10.16%12 19-Joo-01 REC2008 10.00% 0.700 0.700 0.000 0.700 REC 99.900% 10.03%13 21-Jl.II1-01REC2008 10.00% 0.200 0.200 0.000 0.200 REC 99.910% 10:03%14 21-J1.IIl-01REC2008 10.00% 0.300 0.300 0.000 0.300 REC 99.910% 10.03%15 22..Jun-01 REC'2008 10.00% 1.100 1.100 0.000 1.100 REC 99.910% 10.03%16 26..Jun-01 PFC2008* 11.30% 0.200 0.210 0.010 0.220 PFC 104.gsgo.4 9.86%17 27-Jun.()1 PFC2007* 11.89% 0.750 0.803 0:056 0.858 PFC 107.004% 9.81%

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INVESTMENTS DURING 2001-02 UP TO JUNE-01EDU FUND ACCOUNT AnneKure to Item No.5

CATEGORY -> TREASURY BILLSI.

Coupon Face Price Accrud. A~I BriefJ)4 rticualrs of securitySr. Date of SecurityNo. Irwestmenl Invested (% p.a.) Value Interest IllY.Stmenl Issuer Rate YTM

(%) . (%p.a.)1 2 3 4 \ 5 6 7 8 9 10 111 19-Apr.()1 T-BILLS· 0.00% 0.003 0.002 0.000 .002 RBI 99.790% 7.00%2 4-May"()1 T-BILLS· 0.00% 1.000 1.000 0.000 .000 RBI 99.984% 6.02%3 18-May'()1 T-BILLS· 0.00% 0.540 0.540 0.000 .540 RBI 99.923% 7.00%

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ACTION TAKEN REPORT IN RESPECT.OF DISCUSSION HELDBETWEEN REPRESENTATIVE OF :;BT, EPF AND SBI (PMS)AT S~ATE BANK OF INDIA EUILDlNG, MUMBAI ON30.05.2001.

DECISIONS TAKENGeneral :

Points arising out of the Actuary report onvaluation of Pension Fund and the Report of theChartered Accountant on investment of funds werediscussed. It was agreed to put in place anappropriate system, which includes use of ITInfrastructure that is available of late and regularsharing of information between CBT, EPF and SBIsupplementing the present arrangements. '

1. For ensuring tbat there is no idling offunds:A fortnightly report will be furnished by the

SB], on the lines of Annexure to the reply of SBIregarding the audit observations for the period01.04.2000 to 30.09.2000

2. For ensuring that the best availableopportunities were chosen on the days oftransactions, the SBI wiDrevert to the CBT, EPFon the format furnished by the Actuary (Form.No.1). Other reports in Forms 2 to 3 furnished bythe Actuary will be furnished by the SBI.

3. For monitoring the prompt realizationof interest/maturity process:

A statement indicating the due dates andamounts of interest/maturity proceeds to berealized every successive months will be furnishedby the SBI by the end of each month. The samewill be made use by SSB of SBI to make effortwell in advance so that cheques are realized intime and credited to the account of CBT, EPFimmediately. SBI will ensure that out stationcheques are received locally, proceeds realizedimmediately.and fund is transferred to SSB of SBI

Item No.6-

STATUS

State Bank of India has reported that newsoftware has been purchased for better fundsmanagemei t of the portfolio of the CBT, EPF.Security Services Branch and the treasury isbeing networked by a dedicated leased line.After the operationalization of the new softwareremote 10 PIt facility will be provided to theCBT,EPF

Signed fortnightly report in the agreed format isnot being furnished by the SBI. However oneletter ofstn dated 24.7.2001 containing reasonsfor non .nvestment in May, June & July inrespect of PF & Pension fund has been received1?Y.Email(copyenc/osed).

SBI has not given information aboutavailable pppor.tunities etc. in Format No. 1given by i the Actuary. HoweverunsiJnedbrokers Q,hotesw.ere received intermittently. Acopy of sUchquotes dated 5.7.2001 is enclosedfor ready!reference. Regarding other reports inmeeting ¥th CPFC, FA (Labour), Actuary &DGM SBI on 26.7.2001, it was decided thatformats Ifor furnishing information to theActuary are frozen. Data in the prescribed fiveformats as approved by the Finance &Investme st Committee be submitted to theA '

IY.

SBI has furnished the interest and maturitywatching statements for the month of July &August ~001. SBI has further confirmed vide itsletter no SSB/AGMl0476 dated 7th July, 2001that the outstation branches of SBI collectinginterest/maturity proceeds on behalf of CBT,EPF has been instructed to send the-proceeds bymeans 0 •STEPS' .

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at Mumbai through use of SBI-STEPS. Astatement showing the actual realization andexplaining the delay, if an~, in realization, inrespect of the previous month' will be furnished bythe SBI by the first week of each month.4. Information on in-heuse checks on investmentof EPF funds at SBI end ill form of audit report:

Extracts of audit reports with the commentsfrom all the audit reports is so far as the EPFinvestments are concerned will be furnished everyquarter by the SBI.

5. For the investment of Pension funds, theActuary will prepare a note on guidelines onproportion of securities in different terms fordifferent categories of periodicity. The Actuary willsuggest a concrete methodology to minimize theimpact in the event of use of call/put options by theIssuer of the security and also to suggest themodality for investment in such securities in future.

This will be finalized by the Finance &Investment Committee in consultation with theSBIIActuary.6. Securities purchased with put/caD optionsduring the period 01.10.1999 to 31.03.1999-

A review report on the implication with regardto the concern raised by the Actuary shall befurnished by the SBI immediately.

7. A voice recorder system will be installed at theDealers Office by the SBI.

Reports are awaited from SBI.

Note f om Actuary has been received videEmail d,ted 28.7.2001 (copy enclosed)regarding~nves.tment guidelines and a concretemethodol gy to minimize the impact in theevent of se of call/put options by the issuer ofthe securi .

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D~ of securities matured during. theperiod fr<!>m1.10.99 to 31.3.2000 due to put/calloption has been received from SBI vide letterno. SSijlEPFO/nil dated 23.06.2001 (copyenclosed). Further SBI has desired policy Idecisions] in the matter for their guidance in !

future .. tSBI Ieported that installation of voice

recorder system at the Dealers office is underconsider: tion vide letter dated 13.6.2001 (copyenclosed but the confirmation about the sameis awaitefi.

8. Mechanism has to be put in place for collectionof incentives receivable if any at the earliest as perterms agreed to with the issuer.

SBI h~ informed vide Email dated 24.7.2001that mechanism for collection of incentivesreceivab e is in place. A manual register anddiary is maintained at Security Services Branchand reminders are sent after waiting for aninitial period after closure of the issue.

9. In respect of firm allotment in primary issue the A preposal has been received from SBI videSBI will send concrete proposal for consideration letter no. TRffRN/382 dated 14.6.2001 (copyby CBT, EPF. enclo_~~.

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The FA&CAOEmployees' Provident Fund Organisation,Bhavishya Nidhi Bhavan,14 Bhikaji Cama Place,New Delhi 110066

24.07.01.

Dear Sir,

Actuary ReportAction taken on decisions in the 30.05.2001

We refer to your letter no Invest.I/Action taken/F1/98/6743dt 19.07.01. Onthe various points contained therein, we furnis below our submissionsseriatim. .

1. Please find enclosed at Annexure I, the stat~ment of investments andclosing balances for PensionAccount, desired fc r monitoring that thoere noidle funds, for the period 29.05.01 to 21.07.01. We have earlier sent youthe statement of idle funds for the period-1f.01-11.06.01 and period21.04.01-29.05.01. vide our letter no.s Tr[T Nt dated 16.06.01 andTr[TRN dated 20.06.01 respectively. Inddentalh ~we are furnishing to youdally .all these details thro.ug.he-mail,. and are somewhat .surprisedto readthat you have not received any of these stat~~ents. We had, informedyou in o.ur letter n.0 Tr/pmscs/sm/ .dat.ed13.06f1, that the infO.rmation isbeing e-mailed to you daily. -

2. The quotes obtained in a day are being sent to ou bye-mail daiJy, in theformat provided by the Actuary in the captioned meeting. We furnish thedates of sending you the e-mail against the correspondlnq business datesat Annexure II.

,,

3. As to contents of Audit Reports that may be construed to have a bearingon the quality of our investment decisions, ,I(i) our Concurrent Audit for May 2001 hav observed that "Put/call

options are available....Thls has to be en ured so that a review isundertaken at the appropriate time to exerdses the option orotherwise as considered necessary". On th s point we have to clarifythat as the existing investments carry gher' yield than what isavailable presently, it is our view that the e is no need to exerciseput options on behalf of CBTEPF.In cas of the issuer exercisingcall options, however, there will be no alternatives. As long asinterest.markets in the market soften, we.~ink' the same appr.oach.will have to be maintained. Due to this, separate review reporton put/caJl is being made. However, e are c;tdvising you offorthcoming put/call options as also on ca e to case basis throughour Securities Services Branch, and Ob

r'erve that you perhaps

continue to concur to our Views, as no se arate responses to suchfeedback are received. . .

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(ii) Our Inspection & Audit dt 23.06.01. h s .suggested that "moreactive operations of Treasury Bills may e considered by PortfolioManager to avoid idle funds". To this, ou position is that, as T-bil/sales involve capital loss that EPFO has not permitted, all T-Billsmust be carried up to maturity. Furth r, with the stoppage ofissuance of 14 days and 182 days T-Bills y RBI, short dated T-Billsare not easily available, which accounts f r the relatiyely low levelsof investments in these instruments.

"(iii) Quotatlon for the Voice Recorder system has been obtained and

necessary actions will follow. We have air ady paid for a REUTERSscreen for the Dealer and the same is ex cted to be in place in 2-3days time.

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4. As to collection of incentives, a manual register a d diary is maintained atthe S S Branch, and reminders are sent after w iting for an initial periodafter closure of the issue.

Yours faithfuUy,

(H. Contractor)Dy. General Manager( PMS&CS).

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PF MAIN ACCOUNT

O/B INVESTMENTS MADESECURITY AMT.

C/BVAL.DATE

30.4412.10% SAIL 11 15.97 02-May-Ol,

40.85 10.75% NPC 06 10.24 03-May-Ol11~50%KER.SOL 10 6.11 03-May-Ol11.50% MAH.SDt- 10 5.00 03-May-Ol10.35% SOL 11 18.00 08-May-Ol

39.3523.05 10.35% SDL 11 18.00 08-May.:ol

T-BILL 5.04 04-May-Ol23.04

18.02 10.35% SDL 11 18.00 08-May-Ol11.60% GS 20 0.01 05-May-01

18.0135.96 10.35% SDL 11 18.00 08-May-Ol ~

10.8% IDFC 06 10.~3 09-May-0110.8% SBI 05 5.32 09-May-Ol13.95% PNB 05 1.99 09-May-Ol

35.9462.19 10.8% IDFC 06 10.63 09-May-Ol

10.8% SBI 05 5.32 09-May-Ol13.95% PNB 05 1.99 09-May-Ol11.60% GS 20 5.60 09-May-Ol12.40% GS 13 5.75 09-May-Ot10.8% IDFC 06 14.75 09-May-Ol

44.0418.13 12.29% GS 10 5.72 10-May-Ol

5.40 5.40

23.43 10.80% SBI 05 4.29 24-May-Ol11.55% SBI 06 5.48 24-May-Ol12% PNB 07 3.26 24-May-OlT-BILL 4.99 25-May-Ol

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EASONS FOR NON-INV

14.47 unds kept for inv. In NPC issue proposalubmitted for approvalow balance

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0.02Non-availability of PSU/PSFI bonds as thiscrt.had a negative deviation of Rs. 51.83 crs.

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18.1512.41 on-availability 01 PSU/PSFlbonds as this

c t.had a negative deviation of Rs. 37.07 crs.5.40 n-avaitabmty of PSUIPSFI bonds as1his

c t.had a ne.gativedeviation of RS.41.00 crs.Non-avaiJability of PSU/PSFI bonds as thiscat.had a negative deviation of Rs. 43.44 crs.

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10.01 F~nds accumulated lor inv. In 10.65%HfOCOBOOdS

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REPORTING OF BROKER QUOTES

DATE DATE OF REPORTING ~E-MAIL

t'

ll-Jun-Ol 12-Jun-Ol12-Jun-Ol l4-Jun-Ol13-Jun-Ol 14-Jun-Ol ~ •...•14-Jun-Ol 15-Jun-OllS-Jun-Ol 19-Jun-Ol }lfuw~l6-Jun-Ol 19-Jun-01.l8-Jun-Ol 19-Jun-Ol19-Jun-Ol 20-Jun-Ol20-Jun-Ol 2l-Jun-Ol21-Jun~Ol 22-Jun-Ol22-Jun-Ol 2S-Jun-Ol23-Jun-Ol 26-Jun-Ol2S-Jun-Ol 26-Jun-Ol26-Jun-Ol 27-Jun-Ol27-Jun-Ol 28-Jun-Ol28-Jun-Ol 03-Jul-Ol29-Jun-Ol 04-Jul-Ol30-Jun-Ol 04-Jul-Ol02-Jul-Ol 04-Jul-Ol03-Ju1-Ol OS-Jul-Ol04-Jul-Ol OS-Jul-OlOS-Jul-Ol 07-Jul-Ol06-Jul-Ol 10-Jul-Ol07-Jul-Ol 10-Jul-Ol09-Jul-Ol 10-Jul-Ol10-Jul-Ol l1-Jul-Olll-Jul-Ol 12-Jul-Ol12-Jul-Ol 13-Jul-Ol13-Jul-Ol 16-Jul-Ol14-Jul-Ol 16-Jul-Ol16-Jul-Ol 17-Jul-Ol17-Jul-Ol 18-Jul-Ol16-Jul-Ol 19-Jul-Ol19-Jul-Ol 20-Jul-Ol .20-Jul-Ol 24-Jul-Ol21-Jul-Ol 24-Jul-Ol

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DATE 018 INVESTMENTS MADE ClB REASONS FOR NON-INV"-SECURITY AMT. VAl.DATE J

I f29-May-01 59.81 10.65% HUDCO 08 56.00 30-May-Ol 3. ~1 low Balance

J3O-May-Ol 67.30 10.65% HUDCO 08 56.00 30-May-01

11.95% CANARA 07 7.35 31-May-Ol63.35 3.1 5 Low Balance

I31-May-01 35.15 11.95% CANARA 07 7.35 31-May-01

11.5% MP SOL 09 5.67 31-May-0110.80% IDFC06 15.65 01-Jun-0110.80% IDFC 06 5.22 01-Jun-0110.80% JDFC 06 5.22 01-Jun-01

I 39.11 0.0I

01-Jun-01 73.56 10.80% IDFC 06 15.65 01~un-Ol10.80% IDFC 06 5.22 01~un-0110.80% IDFC 06 5.22 01-Jun·0111.6% GS 20 4.05 01~un-0111.6% GS 20 5.79 01-Jun-0111.6% GS 20 5.79 01-Jun-0112.6% GS 18 5.91 01-Jun-Ol12$"10 GS 16 6.01 01-Jun-Ol12.25% AP SOL 09 5.61 01-Jun-01

. 59.25 14.3 Non-availability of Quotes in long datedGOI securities which had a negativedeviation of Rs. 37 crs. on 01.06.2001

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02-Jul-Ol 23.55 11.60% GS 20 8.09 02-Jun-Ol I

12.60% GS 18 11.81 02-Jun·Ol I

I 19.90 3.65 low balanceJ

04-Jul-01 15.15 11.60% GS 20 5.37 04~un-Ol11.30% PFC 06 5.42 06~un-01

10.79 4.36 low balanceJ

06-Jun-01 14.86 11.30% PFC 08 5.42 06~un-0112.60% GS 18 2.37 0B-Jun-0112.50% UBI 06 5.90 07~un-0111.55% SBI 06 5.53 07-Jun-Ol13.85% CANARA 04 3.67 07-Jun-Ol

22.89 0.00"

f07~un-Ot 15.14 12.50% UBI 06 5.90 07·Jun-Ol

11.55% SB.I 06 5.53 07-Jun-Ol13.85% CANARA 04 3.67 07-Jun-0111.60% GS 20 0.04 07~un-01

15.14 0.00

08-Jun-Ol 16.27 1'.25~~ UBI 06 5.38 09·Jun-0111.95% CANARA 07 5.65 09~un-0110.80% SBI 05 5.15 t t-Jun-nt

I 16.18 0.09 ow balance

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DATE OIS INVESTMENTS MADE CIS REASONS FOR NON-INVSECURITY AMT. VAL DATE

,"Q-Jun-Ol 25.76 11.25% UBI 06 5;36 09-Jun-Dl,~

11.95% CANARA 07 09-Jun-Ol5.6510.80% SBI 05 5.15 ll-Jun-Ql12.32% GS 2011 4.13 09-Jun-Dl10.80% SBI 05 " 5.15 t t-Jon-ot11.60% GS 20 0.32 09"Jun-Dl

25.78 0.10l1-Jun-01 25.79 10.60% SBI 05, 5.15 l'-Jun-O'

10.80% SBI 05' 5.15 ll-Jun-Ol12.6% GS 18 5.35 "-Jun-O'12.6% GS 18 4.75 11·Jun-0113.95% PNB 04 5.40 12-Jun-D111.95% CANARA 07 5.66 12-Jun-01

31.46

12-Jun-Ol 17.40 13.95% PNB 04 5.40 12-Jun-0111.95% CANARA 07 5.66 12-Jun-0111.6% GS20 5.15 12-Jun-Ol12.25% KAR.SOl 09 1.13 12-Jun-Ol j

17.34 0.0 low balance

13-Jun-Dl 1.31 1.3 low balance1

14-Jun-Dl 5.61 11.6% GS20 5.69 14-Jun-Ol 0.1 low balance

15-Jun-D1 2.62 11.6% GS20 2.55 15-Jun-01 0.0 low balance

16-Jun-Dl 11.40 11.4C Balance kept for inv, In 10'roREC 2008. confirmed letter ofallotment awaited from REC

18-Jun-Ol 13.65 10"/0 REC200a 15;00 19-Jun-Ol 0.00I

19-Jun-Dl"

19.87 10%REC 2008 . 15.00 19-Jun~0112.32"1oGS 11 0.59 19-Jun-Ol11.6%<3$20 4.86 19-Jun-Ol

'C' I 20.45 0.00

20-Jun-Ol 10.71 10% AEC2OQ6 10.70 21·Jun-Ol10% REC200a 3.30 21-Jun-Ol

I 14.00 0.00l

21-Jun-Ol 14.09 10% RSC2OQ8 10.70 21·Jvn-Ol10% RtC2OO$ 3.30 21-Jun-D111.6",4 as 20 0.09 21-Jun-Dl10%REC2oo8 1.40 22-Jun-Dl10% REC2008 13.50 22-Jun-Dl

I 28.99 0.00I

22-Jun-Dl 36.66 10% REC2oo8 1.40 22-Jun-Ol10% RJ:C 2008 13.50 22-Jun-Ol11.6% GS 20 8.90 22-Jun-Ol12.6% GS 18 9.58 22-Jun-Ol10.52% GUJ.SOll0 2.12 22-Jun-0112%AP SOL 10 1.11 22-Jun-Ol

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11.6% (3S20 . 2.5629-Jun-01 15.56 11.6% GS 20 13.0()

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~un-Ol' 9.35 10.3% HUPCO 06 25.001

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03-Jul-01 59.12 l'.6"k GS 20 5.6511.6% GS20 5.6511.6",4,GS 2() '2.n11.6%GS20 5.6511.6%(3$20 5.65

03-Jul-0103-Jul-Ol03-Juf-0103-Jul~0103-Jyl-b1

11.3% PFC OS 5.5511.6% GS 20 5.65

11.3% PFC OS 5.5511.3% PFC 08 5.5511.89% PFC 07 5.74

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04-Jul-01 41.7811.3% PFC 08

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Time Broker Security' Maturity Coupon YLO. PRICE11.00 MATHA \ GS2020 27-Dec-20 11.60~ 113.25%

STRATCAP GS2020 " 27-0ec-2O 11.60~ 113.25%11.05 GABON I GS2020 27-0ec-20 11.60~ 113.20%11.10 SUNTHI GS2020 27-Oec-20 11.60~ 113.20%

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BIRLA GS2020 27-0ec-20 11.60~ , '113.05%11.45 I-SEC T:.-BlLL SEPT MAT.11.50 OFHI T-BILL SEPT MAT.11.55 HOFCBANK T-BILL 26-JuI-0112.00 STCI T-BILL 23-JuI-01 6.70%12.00 PPFL BOB 06 9.45%

SBI05 9.30%12.15 PREBON BPCLOO 9.45%

IOFC06 9.40%12.30 STRATCAP BPCLOO 9.45%12.45 OARASHAW BPCLOO 9.45%12.50 MATHA . RECOS . 9.40%

BOI06(AA+) 9.65%Since the yields of PSUIPSFI were low none were considered

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NextCard Internet Visa - A1ml)'~0-- -rn~YIN~!1IlnboxFrom: "Bhudev Chatterjee" <[email protected]> IllJ.9ck .. __gd.r~.$~IAd.<lJ~LA!!d.re~s

Boo~To: <[email protected]>CC: <[email protected]>

Subject: Fund Money: Investment of Guide lines for S B IDate: Sat, 28 Jul2001 13:34:39 +0530

Mr Ajay SinghCentral Provident Fund Commissioner.Dear Mr Singh

Pursuant to our meeting on 26.07.2001, I will advise, s follows: -

(1) If the money lies in the current account of t e Bank, Fund doesnotearn any interest.first

Therefore, the money should b invested at the

possible opportunity and pending investment, m1ney should be suitablyperked in instrument like Treasury Bill, C P, ,

Call Market etc. for the intervening period. 'I

(2) As long as interest rate is falling different~al between the yieldsamongst outstanding I

terms of Securities is marginal. In such cir umstances money shouldbeinvested at

the highest yielding security notwithstanding the balance term.Situationwill be

reviewed whenever there is movement of

With regards

BHUDEV CHATTERJEEACTUARY

Click a \.~J smiley to send an instant message to an online friend- Prey I Next [Inbox___ Iasattacnm~il!.

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)- 'CfT{/T.el~'l"!}: -secs R BRAN':!. ~umbalThe Asstt. Pro\\ident Fund C~:~9iWO.: l65H'6{r,~f765 Ext. 308Employees Provident Fund Or~jFli~~~Th24. 661032Bhavishya Ni.dhi Bhavan, Wl§IF 'ii.fBr. Cod14,Bhikaji Cama Place,New Delhi -110066. 01 ~ 2

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"IT. ~/No. SSBI SSR/EPFO/ ~/nRmrfDate

Dear Sir,

PUT & CALL DATES FROM 1/10 9

\As desired by you in the

herewith the captioned statement for

31/3/2000 with our remarks.

Yours faithf~lly,

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Encl : as above.

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nt meeting, we enclose

period from 1/10/99 to

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Attn. 8hri S.K.Ray, FA&CAO. rA&@A~ ~ ~': ' IJY"lo. . ~ otlM ••••• " ,.'(", I

13.06.2001.

Meeting dt 30.05.01 with CBTEPF

We refer to the proceedings of the above meeting fo

to advise as under.i

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i) re item 1, ..idle funds .. :- The idle fund posi on containing the same

information is being advised to EPFO daily th ugh e-mail.

If

Rcitcm 2•.. best opportunities .. :-111c quotes lobtained in a day ill the

course of striking a deal, as called tor, ~nqw being sent to EPFOI '

daily through c-mail. As the information contained is the same, we areI

not additionallv introducing the return in tbrtnat I suggested by the." I

...." ~,..r\ Actuary; to avoid duplication of work on both the sides. A copy of the, .

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, ,\ .,; .I ••••" •••: format currently in use, is enclosed. f' !,--' " " ",., ~\\\\''-.. , .!~;,,.~~a~""~"~:~.\~:;"R~ item 3, prompt realisation .. :- steps initiat the SSBranch will be

,~..;l ~\. \ ,.,,\t..\\_,\~ ,~',:!~!~~~~\)'\\~"I.'~ ad~~ing the details called for periodically. '!, "'\ \'V.- \', \,-\ 1\)\\ :\ '\, '~,,s·" .iv) Re item 4, audit report :- observations 0 our Corporate centro

'.' . \ .•~.;-,.,.. flotic~~cnt Audit (monthly). Statutory Audit yearly) and Inspection

;);~..t~:t·~.,.r'/& Audit ( every 18 months), pertaining to quality of Investment\ ~f1..,.r ,\ /"..r' decisions, if any. will be communicated to you as andlwhen occuring. ,

v) Item 5, maturity profile of Pension Funds ... :- .~otcd. I 'vi) Item 6, i~plieation of Call1Put.. :- The branch is ad~ising EPFO and

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inviting decision for all can/put dates. EPFO h ve not, notified of their

ii)

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Intention to cxorci~~ put options .. For' Call op ·c~~ci~I;~'~~;¥i~~~;{4~;~~j: -. _..

issuer, we have ~informing EPFO. The d . s called lor will bei:<r! -' . .. 1 • ": i ~"- :

sent by the branch to you for your eonsiderati ~ after; which kindly

advise of your policy decisions in the matter, . any, f~~ our guidance

in future.

vii) Item 7, voice recorder:- this is under considera on. . i

viii) Item 8, incentives .... :- mechanism in place.\ .

ix) Item 9, ..firm allottment in primary issues.c- As iscussed, if the issues

of SGLs / PSUslPSFIs are over-subscribed, ou bid may get rejectedt

or attract partial allotment, leaving an idle fun havirig been carried

through the intervening period. For the e reason we do notI

participate in the Govt. Auctions for the G-Secs CBTEPF may please

first convey their agreement to such even ities.lt may bementioned that in the recent Monetary and C it Policy, RBI have

announced a plan for setting aside 5% of issue ounts of Govt dated

securities for retail investors that will, be availa le to PFs. A detailed

guideline and mechanisms of this is yet to be reI

Yours Iai th fully.>~~~~Manager(PMd & Custodial Service)

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'The FinancIal Advisor & CAO,Employees Provident Fund OrganisationHead Omce \ . A~ L)BhavishyaNidhi Shavan t<.Y"- -'" P ~ f1Ao, ". ~14. Bhikaji Cama Place H ,(,/\4 1! c ' .i. " 1/ I -New Delhi 110 066 ~tflll*"" .rncc·'r"'J1l.~lA!..,L ..t-rI ~L1{.~1 "~ _9\0-•..•. , --'\ >1...,,---'~~, ifilIlq; I No. : TrJTRNI 3~2- ft-riiIi I Date : 14~ June 1f.!J ~~Dear Sir ,.",\ -~~. ' ,UI""-.,.NI'- " lbt)y- ,

Employees' Pension Fund Scheme ,...,tt"'J.'f ~I ~, . ").\'~Actuary Valuation - Pricing of a security ~ .

!With refe NBt,ions of the actuary regarding th yield that can be derived

Iin case of Non-SGL securities that carry embedded put/caJi ions. ~ have to adVise

as~$ i~:I

At present Investments of Pension Fund monies out! both byway of

investments in !resh securities from the primary market as well s by ~ or purChase of

already Issued securities from the secondary market ! '

A. PrimarymarketInvestments :: '

,In case of primary market Investments, the securities a ~11y Issued at par,i

l.e. Face Value, except In few cases these are Issued at a d~unt Thus, In

case of a primary market investment, the price of the ~~' is fixed on theI I;

basis of its coupon The coupon of a primary market i~ is d,etermined on the ,

basis of the following factors :;\

i) Tenure of the security - The maturity period of th instrum,ent is the basic. "-~! .

factor taken into consideration for determining its •:

ii) Credit standing of the issuer - An issuer with a igh~ ~it rating will• 'I"

tend to offer a lower coupon \\; :

iii) Redemption - In case where the issue carrying III ered rec:lernJ:*ion,i !

the average maturity is treated as its nominal matu ly fot determining the

iv)

coupon

Call Option - For a security carrying a call opti

treated as its maturity date, irrespective of its actual maturity

'I) Put option -In case of a security carrying only a p opti<'?fI,this facility is

treated only as an exit option for the investor d is not taken into

consideration for determining its coupon and in suoo; securities, the. rmaturity date or first call date is treated as its tenure or foQngthe coupon

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B. SecondaryMarketpurchasesIn case of secondary market transactions, since th purchases are made of

securities that are already issued, the price payable' fixed on the basis of the,yieJdavailable. The yield of a secondary market secun is arrived at on the basis

of the following factors

a) Residual Maturity - The residual maturity of tpurchase is the basic factor taken into consid ration for determining its

yield

b) Credit standing of the issuer - Like in the ca of pnmary investments,

___ -rr: ---------5lSe*6~ufIHRties-tssUed by issuers of higher credit rat" will carry a lower yield

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Redemption - In case of staggered redempf securities, the average

maturity of the security is treated as ,its nominal esidual:maturity ~

Call Option - The first call option date is treat as the maturity date of. ~ ,

the bond for determining Its residual maturity aI

basis irrespective of the actual maturity of the in

Put Option - As in the case of primary invest 5,- in case of security

carrying only a put option, this Is disregarded I arrMng at the' residual

maturity. !.-

Thus, all investments! purchase or securities on behalf of CB1PF, the couponlyle/d is

fixed on the basts of the above mentioned criteria. As required, we enC,losethe ~talJs ofsecurities with call options purchased In the Pension Fund ~nt :OOrlngOctober"':' /

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PENSION FUND· PURCHAse OF SECURITIES WITH PUT/CALL OPTIONS DURING OCT SS - MAR 2000

DATE SECUR/TV COUPON MAT. DATE PIC DATE RATE F.V. . YTM/CALL YTM/MAT.COUNTER PARTY

12-Oc:t.Q910SI05 14.00% 03-0ct..Q5 03-0ct..()3 105.5596 10.00 12.1596 12.6296DEUTSCHE BANK12-Oct·9910BI05 . 14.tlCJCK,__..Q:3-Oct-O.5.... Q3.0;:t~ 1~.55% ..._.•..5.00,: -v- _12.15gr,~~:.::12..s:a ..ITC:rHREADNREEDLE17~Nov·9910SI"05··· ·14.00% Q3.0ct·05 03.Qet-03 105.55% 5.00 12.09% 12.59% rrc ltiREADNREEDLE25-Nov·99 lOBI05 14.00% 03-0ct-05 03-Oct-03 105.55% 5.00 12.09% 12.58% ICICIS-Jan·oo lOBI05 14.00% 03-0ct-05 O3-Oct-03 106.10C16 15.00 11.83% 12,41%DEUTSCHE BANK7.Jan-OOlOBI 05 14.00% 03-Qet-OS O3-Oct-03 106.10% 5.00 11.83% 12.41% ICICIO-Mar-OOBPCL 00 12.00% 01·0e~ 0~-0ec;.Q4 ·103~ 9.00 10.85% 11.11% ZURICH I MF

_----~~~ 01-Dec·06 01.Dec-04 103.96% 1.50 10.-85% 11.11% KOTAKMF6-Mar-OOBPCL06 12.00%.. 01.Dec.06 01·Oee-04 103.~ 1.50 10.85% 11.11%KOTAK MF6·Mar-OOBPCL06 12.00% 01-0eo-06 01-Cec-04 103.56% 9.00 10.96% 11.19% KOTAK MF7·M.r·OOIOC 2007 10.85% 21·Feb·07 21·Feb-07 99.50% 10.00 11.01% 10.97%DEUTSCHE BANK7·Mar-OOIOC2007 10.85% 21·Feb-07 21·Feb-07 99.50% 10.00 11.04% 10.99% HSBC7-Mar-OO.IOC2007 10.85% 21·Feb-07 21·Feb-07 00.25% 10.00 11.11% 11.05%i-ssc7·Mar-OOEXIM2008 13.50% 31-Dec-08 31-Dec-03 107.60% 10.00· 10.95% 12.02% BIRLAMF7·Mar-OO IOC2007 10.85% 21-Feb-07 21-Feb-07 100.00% 25.00 10.90% 10.89% -ssc1·Mar.OOMTNL2004 11.75% 20-Sep-04 20-Sep-02 101.65% 5.00 10.92% 11.23%STCI9-Mar-OOMTNL 2004 11.75% 2O-Sep-04 20-Sep-02 101.61% 5.00 10.85% 11.16%sro

22·Mar-OO8PCL06 12.00% 01·Dec:-05 01·Dee-04 103.96% 3.00 10.99% 11.22'l!ISUN F&C .23-Mar-OOIOC2007 10.85% 21·Feb-07 21·Feb-07 99.40% 5.00· 11.06% 11.01% TEMPLETONMF23-Mar-OOIOC2007 ,\0.85% 21·Feb-07 21·Feb-07 99.40% 10.00 11.06% 11.01%KOTAKMF23-Mar-OO1OC2007 1'0.85% 21·Feb·07 21·Feb·07 99.35% 10.00 11.07% ".02% ANZ GRINDLAYS

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Item No. 7 - ISSUES RAISED BY THE A~ARY AND PORTFOUOAUDITORS IN THEIR REPO,TS

II

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In the Actuarial valuation of Employees' Pelision Scheme, 1995 as on, I

31.3.1999 Actuary has made certain observations reg I rding investments, extracts

of which are enclosed. In the report, there is a gene al remark of the Actuary on

Issues raised by aCfuary

the performance of Pension Fund as "Fund is driftin ". This statement has not

been duly substantiated in the report nor has an basis or any assumption

reported. Further, actuary raised the issue regarring formats for furnishing

information for actuarial valuation.

Issues raised by portfolio auditors I .

Reports of the portfolio auditors for the periods from 1.4.99 to 30.9.99,

1.10.99 to 31.3.2000 &1.4.2000 to 30.9.2000 were ~Iaced before the Finance &

Investment Committee along with the para-wisecomnitents of State Sank of India

in its 62nd meeting held on 25.5.2001 wherein it ~as decided to constitute a

committee consisting of Sh. W.R. Varda Rajan, Shri ~.P. Chowdhary, Sh. BhudevI

Chatterjee (Actuary), Addl. CPFC (Pension) and FA&CAO of EPFO who may visitI I . "

Mumbai and suggest practicallworkable guidelines forthe portfolio manager on all

the major issues raised by the auditors. .Accordingly, a meeting between the

representatives of the CST, EPF and State Sank of India was held on 30.5.2001 at

Mumbai and certain recommendations were made I by the Committee (CopyI

enclosed). An action taken report on these recomjndations is placed as a

separate item. . I

1

I

To deliberate on the various issues raised by!the auditors and actuary in

their reports, Central Provident Fund Commissioner and FA (Labour) held aI

meeting on 26.7.2001, copy of minutes of the same is tnclosed.

I

The matter is accordingly placed before tre Finance & Investment!,Committee for its consideration.

46C:\F&I meeting 63_10.8.01I1tem 63.doc

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I11 11 6172660 Pa01l:)

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MINUTES OF DISCUSSION HELD BETWeEN RrReSENTATIVE OFCBT,EPF AND 8BI (PMS) AT STATE BANK OF IND BUILDING.MUMBAI

ON 30.05.2001

I

--'._ ~un-Ol-0l· 09: SOA FA & CAD

RJt~PR":SRNTIN(; CBT,Err·'

Mr.W.R.Vuruda Raja". Mcmbcr,CBT,EPFVir.J.I'.Chlltldhary, Member ,CHT,EPFMr.Bhudc::v Chaneriee, ActuarySh.A.Vi~hwunathan, Addl.CprC,PensionSh.S.K.RAY.FA&C'AO

EPRE~"'::'l4TING SRI(PMS»

Sh.P.R ieshwar Rao,C"GM(treasury)Sh.H ant <':onlntctor. IXiM, PMS .

II

Points arising out of the Actuary report r 1 Viluatir of Pension Fund and the

Report or ihc t11:1111lJC<1 Accountant on investment . ,f runds re discusse<I.

It wtIFI agn ..'Cd to pUl in place an appropri ItC SYRlen{.which includes use of IT

infrastructure Lh~t is available of laic and regular ·;haring o( Iuformation between ('JH.

EI)F and SBJ supplementing ~hc present arrangements.

I . For enlllurins that there is no idling of funde i

A fortnightly report will be fumiRhed by the SBI, on ~he lines of Annexure to the

replyof SIJJ regarding me audit obser- ations for the period OI.U4.2000 10

30.OCJ .2000

2. For ensuring tbat the best available opportunities were chosen on tile days of

transactions, the1~~ the C) ~T.J-:IJFon Ithe fOm1al furnished hy the

Actuary (Form No.l). Other rcportH in Forms 2 to 3 f,rnishcd hy the ActUlifY will

be furnished by the SBI.

.1. For monitoring lhc prompt rcali/.alion ofilllcrcstlmat~jty process:I

A stutemenl indicating the due dates and amounts Of~nlcrcst/maLuriTY proceeds

Lahe realized every successive months wiil be 'umis cd hy the SOl by the end (If

each month. Tho same will he made U8C by SSB of SBI to make effort well in

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advance so that cheques are reali?ed in tmc ant credited to the account of

nH.IlPF immediately. SBT will ensure Illat out tation cheques arc received

tocully, proc~Cd~ realized immediately and und is ransferred to ssn or sm tit

Mumbal through use of SBI-STEPS. A staismen; 'towing the actual realization

and explaining the delay. if any, in realizat )0, in 1SPCcL of the previous month

will be turnisbed by the SBI by tbc first wee- orC8c~month.

II

Infbrmation on in-house checks on investmeut of HP~'funds at SRI end in form ortlUdit report: \Extracts of audit reports with the comments from llUllhe audit reports is so tar as

I

the E.,F inv~tment.o; are concerned will he furnished rory quarter by the SBI.

5. For the investment of Pension funds. the ACI liUY will prepare ~ note em guidelines

on proportion or securities in din01'c:nt term- for difften1 category of periodicity.

The Actuary will sugges! u concrete mctho,'ology tol minimi •••.e the impact ill the

event of use of call/pu; options by the Issuer .If the ~cqurilY and also 10 suggest the,

modality 'or investment in such ~ccuritie5 in futurc. i

I

This will be finati7ed by the Finance & h,v(;stmcrul Commlnee in consultationI,

with the SRliActuary.

Soeuritic8 purchased with put/call option. during the period ()1.1U.I (}99 to

~ I.03.1I)c)<)-il

A review report on the impljcation with reganJ tOi the concern raised hv theI -

AC1U.uy shall he furnished by the sm Imme iaiely. I

7.,

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A voice recorder system will be 111Rlalledat ~-ic Dcalcnf Office by the SBI.

~. Mechanism has to he put in place lor colle< .ion ofincentivcR receivable if uny :11

the cnrl;051 as per lerms agreed to with the is-ucr,

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9, In respect or firm allotment in primary issuc t c SBI will send concreteproposal for consideration by CRT. EPF.

(Mr.W.R.Varada RaJan) .Member .•CB.T.F.PF '1

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(Mr..61~~aUdh"'.y}-----'--'"Member .CBT.EPf

~'"'""-'(Mr.Bhudev Chatterjee)Aclual)'\ .--;-, . j . ~,~~'t)\ { .~:....N-

(Sta.A. Vishwariathan)Addl.CPFC.P'''''lIion

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P.RaJcs.bwar Rao)CClM(Trcusury)

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Minutes of the meeting of CPFCand FA(Labo~r) with Actuary andPortfolio Auditors and State Bank tf India

Held on 26.7.2001I

Present

1.

2.3.

Shri Ajai SinghSmt. P4avin TripathiShri Gaurav DaveShri A. VishwanathanShri K.L.TanejaShri Bhudev ChatterjeeShri Hemant ContractorShri S.C. Bhadra, CA

Central P.F. Commissio erJoint Secretary, FA (Mi istry of Labour)FA&CAOAddl. Central P.F. Com issioner

ner (Investment)4.5.6.7.8.

Regional P.F. CommissiActuaryDy. General Manager, Sfate Bank of IndiaPortfolio Auditor

i

I

II

At the outset discussions took place with the Actuary in the backdrop of his Email dt.I

28.07.2001, as well as the actions agreed in the meeting with FA (Labour) on 26.07.2001 and with

S6I on 30.05.2001. I

One of the issues that had not been finalized so far pertained Ito the formats for furnishingI

The following items were discussed :

1. Formats for furnishing information to the Actuary

(

information. It was discussed that excepting one format others as declded earlier had been mutually

accepted. Earlier all formats had been approved by the Finance and Investment Committee.

Subsequently, however, in the meeting on 30.5.2001 with S6I, Actua'lY had again raised the issueI

especially about format no 1. There was difference of opinion between the 561 & Actuary on theI

format no. 1. S6I have furnished information in a slightly dltfererit format stating that other,

information required by Actuary in his format no. 1 is not relevant. 4fter due deliberations it was

decided that as long as Actuary was furnished a yearly report in the prescribed tabular form by the

Finance& Investment wing, he had no problem in the details of the format no. 1.

[ Action Finance Wing]

It was also decided that Actuary will furnish the required so are to the finance wing for

generating desired report which will thereafter be furnished to him every ear for his valuation work.

[ Action Actuary ]

It was also decided that the formats for information would be nfw treated as frozen and will

not be changed any more.

General remarks of the Actuary on the performance of PenSion fund

There was a detailed discussion on the general remarks of the Adtuarv in his valuation reports.

In the valuation report of EPS,95 as on 31.3.1999, Actuary has recommended the pension relief of. ,

4% to all pensioners as on 31.3.1999 with minimum of Rs. 450/- p.m fr'r widow and Rs. lSO/-p.m for

child and Rs. 2S0/- p.m. for orphan. In this valuation report as earli r reports there is a general

remarks on the performance of the pension fund as \\ fund is drifting". This statement has not been

2.

50

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duly substantiated in the report nor has any basis or assumption repo ed. The Actuary was explained

the rigid investment pattern prescribed by the finance ministry and foil wed by the portfolio manager.

He stated that while no calculations had been made by him regarding t e hypothetical loss suffered by

the fund on account of delay in collection of interest, incentives, aturity proceeds and delay in

investment, he however felt that their would not be any loss if capital remains univested for a period

and income/capital gain at delayed investment outweighed the pre- nvestment income/capital loss

together with income for uninvested period. Actuary further stated th t he could not quantify such a

loss suffered by the fund. He was requested for specifics, when he indicated that it was his

'impression' and therefore he used the word "Drifting" to indicate that' the fund has not performed as

it should have". According to the Actuary it was the job of the auditors 0 quantify the loss on account

of such purchase, idle funds, delay in collection of interest, incenti es and maturity proceeds for

whatever reasons. The auditors in turn said that it was difficult to calc late such hypothetical loss. In

the opinion of the Actuary quantification of such losses should be p ssible after verification of the

records of the portfolio manager. The auditors were therefore directed to make calculations to arrive

at the exact notional losses after which a view could be taken on 'the ssue of drifting of the pension

fund. I [Action Auditors]I

c

It was also pointed out that the portfolio manager is handling th complete portfolio of the five

accounts which includes not only EPS but other EPF, EDLI, SPF, Pen ion & Gratuity fund etc. The

auditor is carrying out the audit of all the funds of the EPFO.Even in t e case of Pension fund out of

total corpus of Rs.34126.42 crores as on 30.6.2001, Rs. 18181.281crores is invested in public

accounts! 50S accounts where no drifting can take place. There is inv~stment of Rs7157.31 crores in

Central Govt. securities! SDL in which no delay take place. This leaves an amount of Rs 8787.83

crores invested in Govt. guaranteed securities/bonds of PSU/PSFIs.The!yearly investment were of the

order of Rs.2360 crores during 2000-01. The monthly average being Rs.196 crores. Every month

investment was made on an average 48 times. The aspects for loss ate thus restrictive to occasions

where the delays in making investments may be as explained by portfolio manager. Therefore the

impression of Actuary does not give the correct picture.

Actuary further i~vited attention to auditors reports about the in~estment decisions of portfolio

manager and mentioned that SBls reply had not been substantiaterf SBI was instructed to give

detailed reasons for each point. The portfolio manager explained th~ market mechanism and the

procedure being followed at their end and also agreed to give detailed reasons on auditors points.I

[Action S8I ]

The portfolio manager also felt that auditors should have first d scussed the report with them

before finalizing it as no. of points could have been clarified and settl d at their level. The practical

procedures being followed by the bank are as per the established arket practice and it will be'.

worthwhile for the Actuary and the auditor to get familiarized by visitin the fund managers office in

Mumbai to study the system.

c:lfininvest\minules meeting-FA 26.7.01 2

5\

Regarding the investment decisions, portfolio manager mentionet' that the prices of securities

change several times in a day and it will be impracticable to carry on watching though out the day

without striking any deal .. Rates may fluctuate several times in a dal The rates reflected on the

National-Stock Exchange are subject to availability of the security. Ilf somebody gives quotes to

o C someone and not to the Central Board of Trustees, EPF, it cannot be preSUmedthat the securities in

tune with the funds available with the Portfolio Manager were available in the market. Investmento I

decisions are made not only subject to availability of funds but als,o befitting rates, investment. . I'

pattern, Central Board of Trustees guidelines, safety and track record lof the issuer/seller which are

also kept in mind while striking a deal. Investment decisions cannot be ~aken in an arbitrary manner.

In that manner against each decision it could be questioned as to 1hY another security was not

purchased just by referring to the quotes in the National Stock EXChangr- Calculation of notional loss

without considering the aforesaid factors will be therefore futile. I

I

The Portfolio Auditors further stated that there will not be lany use in calculating such

hypothetical loss as informed in their letter dated 26.5.2001. Diffe~ence between the quotes inI

respect of purchase of secuntles available in the National Stock Exchangr and the deal price cannot be

stated as notional loss caused by the State Bank of India to the fun~ due to price movements, inI

securities several times during the day. Accordingly notional loss cannot be quantified by them. The

auditor confirmed that the loss on account of delay in collection of interest, incentives and maturity

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proceeds can be quantified. However delay mayor may not be due to valid reasons, casewise

clarification for which should be called from SB!. The portfolio manager agreed for furnishing such

clarifications. [Action S8I ]

3. Investment Guidelines

c. It was decided that Actuary will furnish a note on guidelines on proportion of securities in

different terms for all category of periodicity in respect of investment of PensionFund.

[Action Actuary]

4. Thereafter the points raised by the auditors in their

thread bare. Itemwise points raised by the auditor and

deliberations is as given in the statement placedbelow.

I

fotr reports were discussed

adtion as agreed after due

c:lfininvest\minUles meeting·FA 26.7.01 3

cr:o<"'o (a)

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51.

NO.ISSUE RAISED BY THE

AUDITORS

De~ler is not equipped with

any screen and information

from Press

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AGREE9 ACTIONS

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[ NoAction]

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considered as indicator for

striking the deal

It was stated by the D~M, SBI that although there is aI •

Reuter screen already availrbl,e with the Deputy Gener:al

Manager looking after the P~rtfOIiOof the Central Board ofI

Trustees, EPFOne more Reut,r screen will be provided to the

dealer within a week. I

Portfolio Manager stated that the State Bank of India

have got their Economic Rese rch Wing/Historical data is kept

and from time to time analysi!> is conducted on the borrowers

as well as the market condltlohs. The investment decision is

based on the research data frpm this wing. Historical data is

positively considered while striking a deal. Every day officersI

of 5BI investment committ~e responsible for making the

investments make the strategy, after due deliberations,

depending upon the funds pokition. Instructions are issuedI

to the dealers to buy securltles relating to all categories so asI

to get maximum possible ~ield within the constraints of

investment pattern keeping in r-.'iewthe safety aspects.I

[ NoAction]

I (c) Recordsof Investment Deals

It:

(d) Installation of voice recording

system

Deputy General Manager, State Bank of India stated that

the details about the deals arte maintained in the deal ticket,

and investment notes are .approved by the competent

authorities of the bank in 'accordance with financial and

administrative powers dele9a~edto them and the same are

being produced before the a~ditors now. Portfolio auditors

confirmed that now the recordt are being maintained.

< [ NoAction]I

Deputy General Manager, rtate Bank of India stated that

quotations for Voice RecordinF System have been obtained

and the purchase deal will: be finalized shortly. Voice

Recording System is likely to i be installed within a fortnight,

confirmation of which will be s1nt to EPFO.

I [ NoAction ]\ i

(e) Physical

securities

verification

c:\fininvesrvninutes meeting-FA 26.7.01

of In case of PSU/PSFI/STGIcategories, all the scripts can

not be produced before the f3uditors at the time of theirI

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Iphysical verification because it is an on going process in

which the letter of allotmer t are received in first stage

followed by the receipt of bO~ds/debentures. Further some

securities are kept in outstatlon branches where issuers arei

located to facilitate speedlar collection of interest and

maturity proceeds. DGM, Sta~e Bank of India confirmed that

all securities pertaining to cerltral Board of Trustees, EPFareI

physically available on whatsotver location it may be and are

in proper safe custody. I

l [ NoAction ]

(f) Non adherence of pattern of

investment

SBI clarified that Investment pattern is being maintainedI •

every year. For the year as ger requirement and not on day

to day basis. However to kfep the position under control,

day to day deviations are worked out. For the year 2000-I

2001 a consolidated computation sheet about the maintaining

of the investment pattern was blso furnished.!

[ NoAction]

Deputy General Manager, State Bank of India stated

that substantial chunk of investments and securities

proceeds are collected in time but there may be some

delays to credit the proceeds' in the accounts of CBT, EPF

due to intervening holidays, clFaring time.

Actuary stated that wherever interest is credited in the

account of Central Board of Trustees, EPF after the due

date irrespective of the reasons, it causes loss to the fund

and the same should be quantified by the auditors.

Deputy General Manager, I State Bank of India stated

that wherever the cheques ate sent for clearing it will not

be possible to credit the pr1ceeds on the due date even

though the cheque is collected in advance. As regards

(9) Delay in collection of interest,

incentives, maturity proceeds

,

incentives, Reserve Bank pf India pays commission,

wherever provided in the prospectus for issuance of State

Development Loan within thel 30 days and the same may

be taken as an indicator in ~II cases. It was pointed out

that in some case; issuers m*y prescribe the period earlier

than 30 days from the date pf issue in the prospectus, inI

such cases the period for, del~y in receipt of incentives may

be taken as prescribed 'in the prospectus. Accordingly,

auditor should quantify the [oss taking into account thatI incentives will be receivable ~ithin 30 days or the periodL-__~ L- ~ ~

5c:lfininvestlminutes meeting-FA 26.7.01

54

I

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prescribed in the prospectus whichever is less. !!After due deliberation it VI as decided that losses due to !

delays in collection of interest, maturity proceeds will be

quantified by the auditor after adding the following clearing

time in due dates. I

I

(i) Cheques of Rs.lOO,OOO/~r more - One day

(ii) Local cheques less than~s. 100,000 -Three days

(iii) Outstation cheques - Five daysI

It was further decid,d that State Bank of India

would collect the proceeds t1rOUgh its outstation branches

and get the remittance b'( way of STEPS facility to

minimize the outstation cheqJes clearing period.I

I[Action Auditor] I

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HMT Cases

Non receipt of Bonds against

letters of allotment

Deputy General Manager, ~tate Bank of India stated HMT

Ltd desired the waiver of a~out Rs.19 crores for one time Isettlement of its dues whic~ was not accepted. It was I

I I

decided that State Bank of In~ia should prevail upon M/s HMT ILtd that the case of Central B~ard of Trustees, EPFcannot be

taken at par with the commercial organizations like IOBI,UTI

etc. Central Board of Trusteef' EPFholds the money in Trust

for working class and can not waive the dues. :, . I[Action 581] i

•Actuary desired to know as to whether interest is being Ireceived. in all cases wherever only letter of allotment is

received and bonds/debentures are not received. Deputy

General Manager, State Bank !of India confirmed that interest I

is being received in all cases ~nd follow up is being made to Iget the bonds/debentures. I

It was decided that irrekpective of stamp duty/ other

problems to the issuers of I bonds, SBI would collect the

bonds/debentures in all caseJ and a latest status report will1

be furnished alongwith comments regarding old pendingI

cases, if any.

[Action 581 ]

(J) TDS It was decided that State ~ank of India would launch a

drive to educate the issuers t~ adhere to the Tax Provisions

of Income Tax Act and not td deduct the Income Tax fromI

c:lfininvestlminutes meeting-FA 26.7.01

I

6

5S

the interest receivable by Central Board of Trustees, EPF.

In case of repeated defau t the borrowers will be told

clearly that no further inves ment would be made in their

bonds/debentures if they c~ntinue to deduct the Income

Tax at source against the Ie al provisions. The State Bank

of India was further advised to collect pending form 16A

after due corrections in refpect financial year 1998-99,1999-2000 and 2000-01 so fhat refund can be taken from

income tax departmen~. I

[Action SBI ]

(I) Deals with the maturity periodsexceeding the limits prescribedby Central Board of Trustees,

EPF

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Idle funds lying in current

account on various dates

c:lfininvest\minutes meeling-FA 26.7.01

Deputy General ManagF>r, SBI stated that their

concurrent auditors also recemmended more active trading

in the T-Bills which is not pcsstble due to caveat of selling

the r-ams only at profit i.l State Bank of India is not

allowed to sell the treasury ills at capital loss. Further T-

bills are the only invest 'I,ent avenues for short term

parking of funds: Conseque~t upon the discontinuation of

sale of 14 days T-Bills byl the Reserve Bank of India,

availability of T-6iJ/s may no~be there all times for a short

duration of three or four days; Further for taking the

advantage of good issues in the market sometimes the

funds have to be accumulsted. Funds accumulated for

availing such investment averues are in fact earmarked for

making the investment in these particular issues. For

getting better yield portfolio manager suggested that,

instead of making rash investment decisions/parking of

funds prudential investment .decistons may continue to be

taken. However, to avoid idling of funds the additional

short term parking of fund in call money market and

repos may also be considere .

As decided in the meetitg with the representatives of

the Central Board of Trust4es, EPF and State Bank 'of

India on 30.5.2001 , a signed fortnightly report in theI

agreed format should be furnfshed by State Bank of India.

Ii [Action SBI]

Deputy General Manager,ltate Bank of India stated thatI

proposal to increase limit 1f maturity period in case of

PSU/PSFI category frorri 5 II years to 10 years may be

considered to increase. the [nvestment avenues. Further

nationalized banks are coming in the market for T.JfJt;'II\

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capital which can be good ir vestment options provided the

guidelines of Central Board 0 Trustees, EPFare amended as

envisaged. This issue will be exarnined.

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Broker-wise exposure exceeds

SOfo of total amount invested in

the secondary market

Deputy General Manager, State Bank of India stated

that all such cases are repor ed by them to their board as

is being done by them for 5B 's own investment.

It was decided that State Bank of India would

furnish the details to Central t oard of Trustees, EPFwherever

exposure in respect of particul~r broker exceeds 5%.

[Action SBI ]

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(n) Delay in settlement of deals,

investment opportunities not

availed while striking the deal

c:\lirinvest\minutes meeting-FA 26.7.01

It was expressed by the Auditor that State Bank of

India has given one line re~IY in respect of certain dealI

tickets pointed out in,AnneX1re-1 to auditors report for theperiod 1.10.1999 to 31.3.2 00 i.e. investment decisions

were taken without substanti ting the same.

DGM, SBI stated that securities purchase contracts of

Non-SGL securities are ca~ried out for future dates,

also(forward trading). settlfments are normally carried

out by way of High Value cleartnq of RBI which takes placeI

early morning. Hence, orily deals concluded for theI

previous day can be executed I under this. Again, RBI does

not carry the High Value cl~aring on Saturdays. Hence,• I

deal settled on Fridays can ontv be concluded on Mondays.

In case of primary investments, the deals can be

concluded only after the counter party gives a confirmed,

letter of allotment. Hence.] in such deals, there will be,

delays between date of execution on account of receipt of

the confirmed letter of allot Inent. In case of deals with

outstation counter parties, the securities have to be

brought in from the respect ve places, which wi" cause

delays of day or two. Further deals are also carried out on

future dates on the basis Oftexpected funds flow .Other

than these, deals are con luded on the immediately

available working day."

It was decided that -*ate Bank of India would give

para-wise comment in respect I of all cases wherever one lineI

reply vtz. Investment decision I was taken, is given by them,

while furnishing their replies to Ithe auditor's reports.II

I [Action S8I ]

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Cases where amount applied is Deputy General Manager, State Bank of India explained Inot fully allotted that in respect of primary ma ket purchases, firm allotment is !

demanded from all issuers but in case of State Development iLoans some times Reserve ~ank of India do not allot the I

IState Development Loans in ull. Since the Reserve Bank of IIndia is not coming in the n arket very frequently with the Iissues of State Development Loans and confirmed allotment

is not assured, twice or hrice application money was

refunded by the RBI. Investrent may continue to be made

in view of the market practice.

I

1 [No Action]

(p) Suggestions by the portfolio

auditors

The items have been noteo and will be taken up for

implementation wherever feaSIble.

i[Action EPFO]

,'-.c:\fininvestlminutes meeting.FA 26.7.01 9

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Item No.8 - Exposure limits - Representation from IC.lllimited

• Existing guidelines of Central Board of Trustees, EPF+ exposure limits are

as under:I

"Present exposure of Central Board of Trustees, EIf on the issuer and

prudential exposure ceilings (in case of banks, RBI hr stipulated that the

total exposure on a single entity should not excee,. 5% of the paid-up

capital and reserves of the Bank). In case ofCBT, F these be fixed on

the basis of the net worth of the issuer." .

• After due deliberations on the presentation made by= Ltd., the Finance &.Investment Committee suggested in its 6ttd meeting, that ttable prudential norms

could be considered, for investment in ICICI Ltd., conldering the situation in

totality. I

• SBI was asked to recommend prudential norms and offer their views on the

following exposure limits as suggested by Mis ICICI Ltd initheir presentation along

with the relevant guidelines issued by SEBI & RBI. i

I

Regulators set prudential exposure limits based on t~is approach.I

Mutual Funds determine their exposure lim~ts as 15% of their fundo

size (SEBI guideline)

o Banks can invest up to 15% of their Tier J and Tier 2 Capital in

anyone entity (RBI guideline)I

• SBI has given its suggestions vide letter no. Invest/pMSCS/SM/337 dated

8.6.2001 as under: I

CBT being neither covered by guidelines appliCabl~ to mutual funds nor

banks, recognition of companies/bodies for investments ~ased on Net Worth as

practiced, is pragmatic. Diversification in different types ~f industries or counter-

parties are only applicable for the PSU sub-segment, all ~f which being in public

sector, net worth and profitability remains perhaps the onlyibenchmark, besides the

rating of the issuer. ICICl's suggestion to link the expostre to an issuer, to the

funds corpus, is somewhat perplexing, as, if this meth~d isladopted, a small issuer

with a NetWorth of Rs. 10 crores would be eligible fo~ the same quantum ofI

investment as a large issuer with a NetWorth ofRs. 1000 crores. JCJCl's suggestion

to link exposure limits to fund size appears to hive beet made with a view to

increasing the level of Fund's investments in Securities ~ssued by them, which

!,

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already stands, at a high level. As stated above, we do not insider their suggestion

to be prudent. I

I •

• As on 30.06.2001 total exposure of all funds of Central Board of Trustees, EPF put

together was Rs 3898.36 crores in ICICI limited. i

I

The matter is accordingly placed before the Finance & Inv~ent Committee fordeliberations on SBI's views. I

C:\F&I meeting 63_108.01/1tem 63.doc 60

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Item No.9 REVIEW OF PATTERN OF INVEST ENT FOR FUNDSBELONGING TO CENTRAL BORA OF TRUSTEES,EMPLOYEES'PROVIDENT FUND

The funds of the EPFOare required to be invested as per the pattern of

investment prescribed by the Government of India accordin to Para 52 of the EPF

Scheme 1952. While earlier the pattern did not perm t investment outside

Government Securities, with effect from 01.04.1993 with e introduction of the

interest being payable on monthly balance the pattern WjS liberalized and the

current pattern is as under :-. :I I1 \

I(i)(ij)

25% in Central Government Securities;15% in State Government Securities arfJ Central or StateGovernment Guaranteed Securities; I

400/0 in Public Sector Financial InstitutionS/Pu~licSector Companiesor Certificate of Deposits issued by a Public ~or Bank (and theInfrastructure Development Finance Company ~td.(IDFC); and/or20% to be invested in any of the above three: categories as decidedby the Board of Trustees.The Board of Trustees subject to their assessment of the risk/returnprospects, may invest up to 10% out of (iv) ebove, in private sectorbondS/securities which have an investment gra(Jerating from at leasttwo credit rating agencies. ! . ..r>

(iii)

(iv)

(v)

The objective of any investments should ideally 'ibe to maximize the. , .expected returns. Returns on a typical investment may consist of two components

I,

• YI(!Id - It measures the cash flows vis-a-vis ~ price at which thesecurity was acquired. I

• Capital gain/loss - This defines the appreci~tion/ depreciation inthe price of security after it is acquired. The investor can book aprofit or loss in case he decides to dispose of the security at anygiven point after it has been acquired. I

1

The extant guidelines for investments of funds ~Ionging to CBT EPFI

do not permit trading by way of sale /purchase of secunties, hence the second,

aspect of returns viz. the returns by way of sale/purc;hasf of securities is n?t

relevant in the immediate context.

C:\F&I meeting 63_10.B.01/1tem 63.doc

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Associated with the investment returns are th risks because any

investment decision is invariably a trade-of between the ·slcsand the returns.

Risksmay be defined as the chance that the actual outco from an investment

will differ from the expected outcome. Specificallyin case

in India which as of now are being invested only in the bt market securities

following three type of investment risksare their :

• CREDn- RISK - This refers to the risks that title issuer may defaultwith regard to timely payment of prindpal~and nterest.

• INTEREST RATE RISK - For an investorw . prefers to hold thesecurity till maturity, the change in .. before maturity isunimportant. :tFor an investor who-Wantsto trade in the . rity during its life, anincreasein interest rate will meana capital· while a fall in interestrate will result in capital gains. . .:

• REINVESTMENT RISK - The cash flows ~'eivedfrom a securityare usually reinvested. The reinvestment ra . will depend upon theinterest rate at the time of reinvestmentand tenor for which theamount is being reinvested hence, there is la possibility that thecoupon and reinvestment rate may differ. Thls·r"'riability is calledthereinvestment risk. !

I

The exposureof CSTEPFas on 30.06.2001is as follows

Ason-~ 30.06.01 0/. exposure

i) Central Government Securities 9212.90 10.04

Ii) State Govt.lGovt. Guaranteed 574p.54 6.26Securities

Iii) Special Deposit Scheme of Central 4428f.26 48.26Govt.

iv) Public Financial Institution .t 14.231305~.21

v) Public Accounti19461.35 21.21

Total 9176p.26 100.00

I

As can be seen from above 20.490/0 of the, total rccretions are in the .

combined categories of PSU/PSFI and State Govemment/Govt guaranteed\ I

securities. Further, as per the existing pattern of investmen~,minimumof 55% of• I

the total accretionsare to compulsorily'be invested i(l th~ two categories.This

combined with the investment option of 200/0 of the total tccretions in either of!

C:IF&I meeting 63_10.8.01I11em 63.doc

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the three categories of Central Govt. Securities, PSU/

Govt/Govt guaranteed securities, depending on the best

the time of investment means that the effective investmen in the categories of

,II!

securities, State

PSU/PSFI securities, State Govt/Govt guaranteed securities much above the

stipulated minimum of 55%.

There is a urgent need to review the pattern of in~ ment prescribed for

investments of CBT EPF as the debt servicing ability of m ny of the issuers in

which CBT EPF haS/can have exposure is being qu . ed with increasing

frequency. The Draft Approach Paper to the 10th FIVe Y Plan (2002-07) has

observed as under about the financial position of state gove ments as under-

I

"2.7 The finances o/. the State Government ~ave deteriorated

precipitously in the 19!1Os The States' Balance ~ Current Revenue

. (SCR) has deteriorated continuously dediningfro~ Rs.3,118 crtJre in\ .. I. ,

1985-86 to Rs.220 crore jn'1992-93 aftet- which it ~rned neg;lthteand

reached the massive figure of minu$ and /S·R£32,3q6 crore in the year

20oo-01! During ~ same period the States'orerall debt has mull/plied

manifold from a level of Rs.53,660 crore in,1986-87 tfJ Rs.4,18,S83Cl"QI'eI

. !

in 2000-01. The consolidated revenue deficit for tile States for 1999-

2000 (Revised Estimates) is 2.9% of Gross Domestic Product and theI

gross fiscal deficit of States toucb~ if leYe! of 4.9lol GrossDomestic

Product surpassing the previous level of 4.2% in 199r-99. .

I

II

2.8 Thedeterioration in the State finances in recent years is, largely, anI

outcome of the fact that in the face of a limited resoJrce-base the States

had to cope with a significant growth in their comJ,itted expenditure.

These indude, walJf:Sand salaries, pensions and rnterest payments,which account for a major proportion of the non-pJ},nexpenditure and

I

together absorb a sizable part of the revenue \~pts. The pensionI

liabilities of fourteen major states have increased f,y 200 times from

Rs.JOOcrore in J975-76 to Rs.2O,OOOcroresin J+-99. It bas, thus,

!

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increased from just 2% of revenue receipts in 1980-~1to about 12% in

1999-2000and is likely to touch 20% by tbeend of life Tenth Plan.

i

I

2.9 A major cause for concem on the retlenue rront is the near .

stagnation in States'. Tax-GDPtatio at round 5.4% th~ the 1980s .

and the 1990s. While borrowings of State Gotlernfe"ts hatle grown

sharply, a major portion of the borrowed funds a1 being diverted tobridging the retlenue gap, leatling tlery little funds forlintlestment in core

sectors. Revenue deficit accounted for 600/0 of the bross Fiscal Deficit!

(GFDJin 1999-2ODDas against only 28.3% in 199o..9~.As a result, the.rehas been a deceleration in the growth of the capita{ expenditure from

37% to 17% between 1980 and 1998.More imJKJTifntly, not only has

the share of plan 'expenditure to total expendilpre of the StateI

GOtlernment declined over successive plans, but the lallocations for the

social sectors hatle also suffered in the process. Plait expenditure hatle

Fallen from 27% of the total State·expenditure· in th~SixthPlan to onlyI

19% in the Ninth Plan. The share of states in otlera{lpian expenditure

has fallen from 52per cent in the Fifth Plan to 37pe, cent in the Ninth, I

I

Plan.

Table V shows the financing pattern 0' state p/ifns lOr the Sixth,,

Setlenth, and Eighth fitle-year plans, and the first fouAyears of the Ninth

p.. 'Ian. It may be noted that State Plan Finances at ~t prices have

increased by only 21% in ten years from the :7'h to thk!l" Plan. Besides,I

central assistance has hardly increased in the !I" PI/'n as compared toi

the previous Plan. On the other hand, ThecontributkJn 0' the balance of

current re"enue (BCR) to the financing of state plans" which was as high

as 28% in the VI Plan has now Fallen to (-) )52%. Thus stateI

gOtlemments are borrowing more and more to filli!ndf non-plan revenueI

expenditures rather than capital expenditures. ThiS,can only lead toi .

Further worsening of the fiscal situation in the·cominf years. I' reclclessI

C:\F&J meeting 63_10.8.01/I1em 63.doc

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JJorrowing is not kept in check, SOIl1!J states may ~ ~forced to dee/a

financial emergency in the liP Plan.

Table V:Finandng pattern of State Plans: (all figures at J993-94 prices)

Sources Sixth-Plan Seventh Plan Eighth Pia" Ninth Plan

(J98O-115) (J985-9O) (J992-97) (.1997-2002)#

States' own Rs. Cr. % Rs. Cr. % Rs. Cr. % Rs. Cr. %contribution

t--_.Total 35J69 28 30220 J8 -6480 -4 I -JO!U07 -52borrowillgS !Total State 4369J 35 6J377 37 90643 52 215334 J07

resourcesi

Central 78859 63 9J596 55 84J63 48 J09927 55

assistancei

Total' 47J74 37 73854 45 90643 52 9.17J9 45

resources

J261J34 JOO J6545J JOO .174806 JOO 20J645 JOO

re

# The scheme of finanCing of Annual Plan 200J-02 used in. the table is as per the

offICial level discussions. "

The precarious financial position-ot State government finances is further •compoundedby the contingent liabilities of state governments in shape of

I

guaranteesextended-by various state governments to i~ers for raising funds

from the markets. In a meeting of the State finance secre~ries with the ReserveI

Bank of India, on November 8, 1997, the issue of government guarantees was

deliberatedupon at length and the view taken was that, inr interest of prudent

financialmanagementand ttle credibility of the guarantees i~ed, there is a need

for a policy on guarantees for each State government within certain nationali

parameters. The finance secretaries requested RBI to c~nstitute a Technical

Committee.toexaminethe issueof State government g~ra~tees in all its aspects.

The Committee consisted of finance secretaries from ~ujarat, Jammu and

Kashmir,Karnataka,Maharashtra,Meghalaya,Punjab\andU~r Pradesh. Ministry

of Finance,Government of India was also represented in ftte Committee. The

C:\F&I meeting 6:UO.8.01I1tem 63,doc 65

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Chief General Manager(CGM) of Internal Debt Managemen,Cell of RBI was the

convenor. The Committee in its report detailed the conceptual issues, groundi

situationsand conclusionsarisingthere from. I

I

I '

A government providesa guarantee on behalf of an entity when it

does not have the requisite creditworthiness/track record to raise capital or!

contract a loan on its own and therefore, seeks protectiOn under the overall

umbrella of the government. Thus" contingent liabilities I are the contractual• I

obligations of the government to 'provide for any eventual~' of default by the. I '

borrower either on .principal amount borrowed or inte~ payment on such

amount or both. While guaranteesdo not form part of cJet>t, as conventionally

measured,these have, in the eventuality of default, the pot.,tial of exacerbating

an apparently sound fiscal system. Guaranteeand credit issuedthrough a state-I

guaranteed intermediary are particularly risky becausethey ~llow the government• i

to pursue unannounced policy decisionS, involve a ~m of management

incentives,and are difficult for governmentsto monitor and q:,ntrol.

According to Article 293 of the Constitution of India a State may not,

without the consent of the Government of India raise any! loan if there is still

outstanding any part ofa loan which has been made tp the State by theI

Government of India or by its predecessorGovernment, or in respect of whichguarantee has been given by the Government of India, or its predecessor

I

Government. Since all the States are still indebted to Government of India, the

constitutional position, therefore, is that prior consent of ~vernment of India is

necessary before State Government raises a loan. Such Iprior consent is not!necessarybefore the Stategovernmentgivesa guarantee. ,II

The rising deficits on revenueaccount have pre-empted financial resources

from investment projects. In such a situation, the guaranteesas a compensatory

measure for maintaining level of public investment assumes significance.I

According to the report submitted by the committee,'.in !absolute terms, the

outstanding guarantees increased from Rs.40,318 crore in: March 1992 to Rs.,

79,625 crore in September 1998 representing an annual dompound growth ofi

12.0 per cent. The growth in guarantees particularly Sitce 1995 have been

C:IF&I meeting 63_10.8.01/11em 63.doc {;b

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Isignificant, the annual growth rate between March 1995 and September 1998 was

13.1 whereas the growth in debt during the same peri was 7.5 per cent.

Guarantees accounted for 30 per cent of consolidated fund jof all States in March

1996 and 46 per cent of revenue receipts in March 199~. Till 1993-94, public

utilities were getting a separate share of market borroWi~ as also substantial

budgetary support for capital requirements. Since 1994-9;' separate allocation of

market borrowings for PSEshas been discontinued. The risi . deficits on revenue

account have pre-empted financial resources from inv ment projects. The

growing need for infrastructure and public investment has r.ut pressure on State

Governments to issue guarantee to mobUise resources throuqh guaranteed bonds.

The Committee had inter-alia recommended that t~ere should be some

ceiling on guarantees being given; guarantees should be given selectively and

according to transparent norms; guarantees should be ~inked to a dynamic

variable such as Net State Domestic Product or revenue receipts: guarantees and!

debt should be linked to the consolidated fund of state .i~lf so that guaranteesI

plus debt together do not exceed twice the receipts in the cpnsolidated fund and:

the ratio of incremental guarantees to incremental net merket borrowings should

be kept constant or brought down.

Following tables bring out the financial liabilities of the State Governments

in some detail.

Table 1 : Trends in Guarantees of State Governments1

(Outstanding as at end-March{

I • (Rs. crore)Name of the 1992 1993 1994 1995 i 1996 1997 1998 1999State 1 (April to

September)

(1) (2) (3) (4) (5) (6) (7) (8) (9)

1. Andhra Pradesh* 3633 5021 5326 5848 4343 7947 9885 10469

2. Assam 1008 1022 1022 945 1430 1430 1430 1430

3. Bihar 1359 1477 1652 73 1184 525 525 525

4. Gujarat 4514 5190 5387 6501 i 6519 6602 7274 7299

5. Haryana* 1264 1526 1856 1811 2362 3749 4119 4119

C:\F&I meeting 63_10.B.Ol/ltem 63.doc 61

(:r-0n0 6. Himachal Pradesh" 370 482 502 495 798 989 1299 1299...-\,(1 f\ ~

7. Jammu &Kashmir" 459 443 480 213 599 599 599 599C~

8. Kamataka= 3051 2255 3640 3862 4669 4887 6122 6517C0 9. Kerala 1744 2296 2320 3229 2082 2069 2466 2866

C 10. Madhya Pradesh· 677 720 1890 287 440 3485 3485 3485

C 11. Maharashtra 7351 6B2 1305 1106 8127 7636 9933 12851

c 12. Meghalaya 159 161 169 170 161 156 151 170

C 13. Orissa= 1090 1333 1357 1484 1116 1919 ·2094 2292

C' 14. Punjab • 1303 1225 1517 2360 2525 6691 7044 7292C 15-.Rajasthan" 2127 3143 3573 3929 5154 6154 64544758C

16. Tamil nadu" 2895 3205 3604 2128 3456 4339 4339 4637CC

17. Uttar Pradesh 4257 4852 5135 5300 4730 4338 4503 4643

C 18. West Bengal" 2450 2193 2299 2246 2893 2380 2480 2680

C' iotal 40318 42682 49035 48649 ,52192 65495 73902 7%25I

C···· Note (1) : Data from 1992 to 1991 has been compiled from Comptroller and ~uditor Genera] of

C India, Government of India, New Delhi. I

C (2) : Data for the years 1998 and 1999 have been compiled from MIs. KJotakMahindraCapital Company Ltd, and PRIME data source. . I

( * : Outstanding Guarantees include principal and interest components except for the year1998 and 1999.

CC

Table 2 : Net, Gross Market Borrowings andIncremental Guarantees of State Governments

C' (Rs. crore)

C Year Net Market Gross Market IncrementalBorrowings Borrowings Guarantees

L;(1) (2) (3) (4)

L1992-93 3471 3805 2364

lL 1993-94 3679 4145 6353 ,

L L 1994-95 5123 5123 -386...

C 1995-96 5931 6274 4143\..

C\F&I meeting 53_10.8.01I11em 53.doc £g

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rc: 1996-97 6536 6536 12704

C (~ 1997-98 7193 7749. 8406

() 1998-99 9434 10848 5723

c: (Full Year) (Half Year)

C Table 3 : Guarantees and Debt of State G vemmentsC (Outstandings)

(%toSDP:

C 1992 1997·

C Name of the Weighted Col. (5) (l/3)rd Col. (II/State Guarantee Debt Total Guarantee@ plus G tee Debt Total of plus

C (2+3) Col.(3) (7+8) Col. (7) Col.(S:

C(1) (2) (3) (4) (5) (6) I (7) (S) (9) (10) (11:

C TOI1. Andhra Pradesh 9.70 21.20 30.90 3.20 24.40 23.40 34.41 3.63 27.0~C'

2. Assam 9.50 42.20 51.70 3.14 45.34 8.51 34.51 43.07 2.81 37.3;C I

C~ 3. Bihar 5.40 42.50 47.90 1.78 44.28 ~.41 48.71 50.12 0.46 49.U!•I

C 4. Gujarat 17.30 27.10 44.40 5.71 32.S1 1¥.93 25.03 37.95 4.27 29.2SI

C1 5. Haryana 8.60 21.80 30.40 2.84 24.64 1~.5O 21.73 34.22 4.12 25.8~•

C 6. Himachal 12.40 49.10 61.50 4.09 53.19 11.65 63.04 80.70 5.83 68.8/i.. Pradesh

C •C

7. Jammu & 15.60 125.90 141.50 5.15 131.05 IU4 77.40 86.54 3.02 80.42Kashmir

~nC 8. Kamataka 11.40 19.80 31.20 3.76 23.56 22.57 32.29 3.21 25.~

C~, 9. Kerala 11.60 34.40 46.00 3.83 38.23 .27 40.10 47.37 2.40 42.5C

(; I10. Madhya Pradesh 2.40 27.30 29.70 0.79 28.09 ~.34 25.88 32.22 2.09 27.9/

L I

11. Maharashtra 11.30 17.50 28.80 3.73 21.23 ~.02 14.30 19.32 1.66 15.95(» •

12. Meghalaya 17.65 26.81 44.46 5.82. 32.63 W.30 31.91 42.21 3.40 35.31Ll

13. Orissa 8.70 42.10 50.80 2.87 44.97 ~.53 47.40 55.93 2.82 50.21

1~.30l 14. Punjab 6.40 39.00 45.40 2.11 41.11 37.70 54.00 5.38 43.0~·1I

C L 15. Rajasthan 13.60 32.70 46.30 4.49 37.19 If-74 34.11 47.85 4.53 38.64

C\

16. Tamil nadu 8.90 20.00 28.90 2.94 22.94 6.56 21.45 28.01 2.17 23.61

l.

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17. Uttar Pradesh 7.40 30.90 38.30 1.39 34.642.44 33.34 .21 33.25 37.45

0.79 19.11•

18. WestBengal 6.70 24.60 31.30 2.21 26.81 .40 18.32 20.72

Average 10.25 35.83 46.08 .08 34.49 34.10

.: NSDP figures are estimated by assuming the growth rate in 1995-96.@: One-third oftotal guarantee as set out in column 2.$: Guarantee-SOPratio assumed at the level of 1994-95.

Table 4: Guarantees of State Governments as Ratio to Consolidated Fund

(per cent)

Name of the State 1994-95 1995-96

(1) (2) (3)

1. Andhra Pradesh 47.06 28.74

2. Assam 18.60 21.40

3. Bihar 0.90 13.00

4. Gujarat 70.20 62.90

5. Haryana 26.20 38.60

6. Himachal Pradesh 24.60 27.70

7. Jammu & Kashmir 8.00 16.10

(8. Kamataka 38.30 46.40

9. Kerala 55.50 '31.80

10. Madhya Pradesh 2.50 3.70

II. Maharashtra 41.20 41.00

12. Meghalaya 20.46 21.03

13. Orissa 28.90 30.10

14. Punjab 30.70 32.00

15. .Rajasthan 50.90 39.20

16. Tamil Nadu 18.00 27.60

17. Uttar Pradesh 27.40 24.10

18. West Bengal 21.~0 25.20

States Average 29.50 29.50L

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C(: . Table 5: Public Sector bank Advances Guaranteed by St te Governments

C (As on March 31, 1998)

C(Rs. crore)

\. Name of the Total Amount Guarantee PaymentsState Outstanding Guaranteed Invoked Made

c(1) (2) (3) (4) (5)

C1. Andhra Pradesh 222.56 146.68 0.61 NIL

C

C 2. Assam 67.02 53.63 18.51 NIL

( 3. Bihar 0.20 4.33 sm. NIL

C 4. Gujarat 149.15 80.44 26.82 NIL

r 5. Haryana 21.93 32.42 NIL NIL

( 6. Himachal Pradesh 4.44 4.76 1.60 Nfl

C 7. Jammu & Kashmir 1.66 0.70 0.70 NIL(

8. Karnataka 69.08 95.81 11.04 5.80(

9. Kerala 125.0] 208.31 10.17 NIL(

10. Madhya Pradesh 26.08 33.98 4A9 NIL(

(C 11. Maharashtra 50.45- 92.92 5.78 4.00

( 12. Nagaland 0 0.80 2.31 0.20

( 13. Orissa 40.41 50.74 39.31 7.36

( 14. Punjab 26.04 39.00 4.39 NfL

( 15. Rajasthan 72.82 116.00 NIL 8.53

l 16. Tamilnadu 33.46 38.13 0.46 NIL

l17. Tripura 62.95 58.92 60.70 NIL

L18. Uttar Pradesh 160.64 205.64 16.02 NIL

l

l19. West Bengal 143.19 77.39 '. 48.55 14.21

l Grand Total 1277.69 1340.6 251.52 40.16i,..

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Further with the stated policy of the Government 0 India with regard to

pursuing of policy of disinvestment investment options n the PSU paper of

specified grade are increasingly getting narrowed down. As more and morePSUs

are being considered for disinvestment the PSUs in which CBT EPF has already

invested its accretions may be put for disinvestment. The n of PSUsin which CBT

EPFhas exposure is placed at Annexure ,.A'. As can be from the annexure

that CBT EPF has substantial exposure in the three finan

lOCI, lOBI and IFO. However, the number of companies i

IFO and 100,.which have been referred to BIFR,

outstanding loans stand at Rs. 7000 crores [Outlook, Auii

al institutions namely

the portfolio of lOBI,

nds at 520; total

6, 20011. Furtherthe non-performing assets in the portfolio of the fina ial institutions is as

indicated below-

rota/NPAs NPAas%td Net Worth NPAs~ % Provisions/write

(RsCr) Iota/loans (RsCr)** ofNetW, 'Nth offs(RsCr)I

I

ICIO 2,982 5.2 7,973 37.40 I 3,006I

!

lOBI 8,371 14.80 9,127 91.70 I 2,509,

*IFO 4,103 20.70 1,546 265.30 410

** Net worth excludes preference capital.* Based on 1999-2000 figures; for 100 & lOBI, 2000-01 fig. have been taken.

(Source: Intelligent l(Jvestor Aug 15, 2001)I

In view of the forgoing it is submitted for the Fintnce and Investment

Committee to consider and recommend modifications in the pattern of investment

prescribed for the incremental accretions of CBT,EPFas undJr:-

~ 25% in Central Government Securities; I

~ 10% ir'1State Government Securities and Central I or State Government

Guaranteed Securities;

~ 15%·in Public Sector Financial InstitutionS/Publiq Sector Companies or

Certificate of Deposits issued by a Public or Bank (and the

Infrastructure Development Finance Company Ltd. IDFC); and/or

~ 50% to be invested in any of the above three cat ories as decided by

thr Board of Trustees.

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The Board of Trustees subject to their 'SSeSSmentof therisk/retum prospects, may invest up to 10 D out of (iv) above,

. in private sector bonds/securities whichgrade rating from at least two credit rating

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ANNEXURE to Item No.9EXPOSURE OF CST EPF ON VARIOUS STATESlORGANISATlONS AS ON 30.08.2001

oNo. Description1 ANDHRA PRADESH

STG PSU SDL462,25,24000

Total462,25,24000

3 ANDHRA PRADESH ST. FIN. CORP 6,52,1900002 ANDHRAPRADESH ST. ELEC. BOARD

/4 ANDHRA PRADESH INFRAQEVP CORP('.5 ANDHRA PRADESH ROAD DEVP CORP

6 ANDHRA PRADESH WATER RES. DEVP

800,0006,52,1900010,00,0000037,03,0000041,82,00000

800,000

10,00,00000 -37,03,0000041,82,00000

C7 ARUNACHAL PRADESH 2,738,0002,738,000c8 ASSAM

9 BANGALORE MAHANAGAR PAUKE 20,00,00000127,20,74000 127,20,74000

20,00,00000010 BANK OF BARODA

11 BANK OF INDIA120,00,0000067,00,00000

120,00,0000067,00,00000

13 8tHAR 501,22,87000('12 "BHARAT PETROLIUM CORP. 24,00,00000 24,00,00000

14 CANARA BANK 170,00,00000501,22,87000

170,00,00000015 CALCVTTA.PORT TRUST

1'EXlMeANK25000

31.1~,.'" .•• 231,00.0000025000

268. 15,S}OQOO197,4EJ.:13000C'17 GWRAT 10,0000000 187,46,73000

('1' GODAVARI MARATHWADA IRRI~.DEVP-19 .GOA

15,QO,OQQOO5,61,~

15,OO"OOQOO

(~ GPA TILLAR. IRRIGATION OEVCOR21 we HINDlJ$TAN COPPER LID

5,OO,OOQ()O25,00,00000

~i()().~··25.00.-"""';

en HOUSING & DEVP.FINANCIAL CORP.23 HA

CU HUTTI GOLD MINES LTD~"ktNDUSTHAN MACHINES & TOOLS26 HIMACHAL PRADESH

1,305,000

8,00,00000200,000 '

25,00,00000i 11,27,76000

8.OQ.()()()()O25.00,0000011,27,76OQO

~27 HtNDUSTHAN PETROUUM CORp. l TO 200,00,00000200,00,00000(28 ' HIMACHAL PRADESH STATE ELEC.BD

'29 HIMACHAL PRADESH FOREST DEVP.C25,00,0000035,00,00000

25,00,0000035,00,,00000

C,30r~lte-\. ~Aek1 ""Ked _~.sg,31 HARYANA

21,00,00000'I 65,91,17000

21,OO,OOO€lO65,91,17000

200,000(32 HARYANA STATE FINANCIAL CORP. 200,000L.33 HOUSING & URBAN DEVP. CORP.

34 ICICI100,09,57000

3898,36,!)8()()()520,000 100,04,37000

8,57,40000 3889,79,18000

36 INFRASTRUCTURE DEV FIN CO LTD 130,00,00000;35 IDBI 63,95,78000 3496,09,41500 3560,05,19500

037 IFCI 1070,38,78000130,00,00000 I

45,54,8000053,42,53000 1016,96,25000

INDIAN OIL CORPORATION 663,60,0000038 INDUSTRIAL INV. BANK OF INDIA I 45,54,80000

663,60,0000040 INDIAN PETROLIUM CORP. LTD

20,41,55000

50,05,00000 50,05,0000041 INDIAN RAILWAY FINANCIAL CORP.

10,00,00000474,37,49000 474,37,49000

10,00,00000

75,28,8800043 JAMMU & KASHMIR ' \ 20,41,55000

1'-,44 KRISHNA BHAGYA JAL NIDHI NIGAM 75,28.880001'--,45 KERALA

46 KERLA STATE ELEC. BOARD 10,02,00000~82,OO,17000

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ANN+URE to Item No.9EXPOSURE OF CBTEPF ON VARIOUS STATESIORGANISA10NS AS ON 30.06.2001

I

Total

CeoC 61

62

0'No. Description47 KERLA STATE FINANCIAL CORP.

STG1,00,00000

PSU I SOL1,00,00000

327,20,40500048 KARNAT~ 327,20,405004,00,00000

20,00,00000c: KARNATAKA FINANCIAL CORP;

KARNATAKA NEERAVARI NIGAM LTO4,00,00000

20,00.000005,00,00000

62,55,50000051 KONKAN IRRIGATION DEVP. CORP.

52 KONKAN RAILWAY CORP. LTD5,00,00000

62,55,5000016,10,00000C53 MEGHALAYA 16,10,00000

298,63,86OOQ20,04.00000

1'54 MAHARASHTRA'- 55 MAHARASHTRA STATE ELEC. BOARD

10,00.0000020,04,00000

1288,63,86000I

C 5& MAHARASHTRASTATE FIN. CORP.57 MAHARASHTRA STATE ROAD DEVP.CO

1,120,00050,04,00000

1,120.00050,04,00000

MAH.KRISHNA VALLEY DEVP.CORP. 20.52,14000C 58 MAHARASHTRA JEEVAN PRADHIKARAN

MANIPURfMOHYA PRAl)ESH~GAR TELEPHONE NIGAM LTD.

29,00,0000020.52,14000

42,00.00000

19,17,40000294, 13,S3000

29,00,00000

19,17.4OCIOO294,13;9aOOO42.oo.0QQ00

3.50,00000eM65

NA110NAL BK OF AGRI.&RURAL DEVNATIONAL ALLUMINIUM COMPANY

460····i~.t~-.f...~

85,~fIQoO4,60,00000

85,00, ()()()QO

c"67 NATIONAL CAPITAL REGION PLANN~000

1~ia5.~300,000

136.35,00000C6B NAGALAND

69 NATIONAL HOUSING BANK(70 NUCLEAR POWER CORP. OF INDIA(~. ORISSA

72 POWER FINANCE CORPORATIOt-.,t

32,92,60000115,00,00000

783,38.00000

! 27,35,00000

131,42,92000

27,35~QQOOo

115,00 oeooo131,42.92000783,38.00000

C 73 POWERGRIDCORP.LTO 91,37,5000091,37,5000074 PUNJAB

\ 75 PUNJAB NATIONAL BANK 156,30,00000119,69,54000 .119,69,54000

156,30,0000015,08,OQQOO5,00,00000

(I 76 PUNJAB STATE ELEC. BOARD1 77 PUNJAB ROAD&BRIDGE DEVP.CORP.

15,08,000005,00,00000

78 PUNJAB STATE FINANCE CORPN54,30,00000

5000 5000.1 79 PUNJAB ST. INDUST. DEV. CORP 9,30,00000 45,00,00000 :

so RURAL ELECTICITY CORP 265,20,00000 I 265,20,00000

1 82 RICHARDSON & CRUDAS 6,00,00000(I 81 15,60,00000 15,60,00000

6,00,00000

184 RAJASTHAN STATE ELEC. BOARD 10,82,50000B3 RAJASTHAN ! 264,09,90000 264,09.90000

10,82,50000B5 RAJASTHAN ST. IND. INV. CORP. 11,85,00000 11,85,0000086 RAJASTHAN ROAD TRANSPORT CORP. 3,75,00000 3,75,00000B7 STEEL AUTHORITY OF INDIA LTO

645,69,84000430,30,00000 430,30,00000

BBl. STATE BANK OF INDIA 645,69,84000I B9 STATE BANKOFTRAVANCORE 1,300,000 1,300,000

90 SMALL IOUST.BANK OF INDIA 37,76,90000 23,24,00000 , 61,00,90000

SIKKIM300,000 I

: 8,67,00000II

300,0008,67,00000

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c:cCO,~o. Description STG PSU SDL Total

93 SMDAR SAROVAR NARNADA NIGAM 2,25,35000 2,25,35000{J4 TAPIIRRIGATION DEVP. CORP. 10,00,00000 10,00,00000c:: TRANSMISSION CORPN OF AP LTD 500,000 500,000

TAMILNADU INDUST. DEV. CORP. 30,00,00000 30,00,0000007 TAMILNADU INOUST. DEV. CORP. 100,000 100,00098 TAMILNADU 298,75,25500 298,75,25500

lJ9 TAMILNADU STATE ELEC. BOARD 115,000 115,000c:: TRiPURA 18,42,38000 18,42,38000TUNGABHADRA STEEL PRODUCT LTD. 3,00,00000 3,00,00000

CO2 UNION BANK OF INDIA 72,00,00000 72,00,00000103 UTTAR PRADESH 675,01,51000 675,01,51000

<-i04 UTTAR PRADESH ST.ELEC.BOARD 34000 34000q:: UTTAR PRADESH FINANCIAL CORP. 32,00,00000 32,00,00000UNIT TRUST OF INDIA 168,000 I 168,000

C~07 VJDAABHAIRRIGATION DEV. CORP 30,00,00000 I 30,00,0000010B weST BENGAL 1,000,000 1166,18,76800 166,28,76$00(,. WEST BENGAL ST.ELEC.BOARD 1,00,15000 1.00.15000

("10 WEST BENGAL INDUST.DEV.CORP- 15,12.00000 I 15,12,00000

C

ANN4URE to ItemNo.9EXPOSURE OF CST EPF ON VARIOUS STATES/ORGAN/SA nrNS AS ON ~O.06.2001

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Item No. 10: Status Paper on 16% HMT Bonds, Face vfue of Rs. 25 crores- Non Payment of outstanding interest and principal.

Initially a civil suit against MIs. HMT Ltd for recove of two third of the

outstanding dues alongwith interest was filed in the court - City Civil Judge at

Bangalore. The defendant company's civil revision petiti01 before Hon'ble High

Court of Karnataka. against the above civil suit was reject4 and regular hearing

was under process. Subsequently a second civil suit for re;very of balance one

third amount alongwith over due interest was filed on 23.10. 000. Both the above

mentioned suits have been clubbed together and the next d te of hearing is fixed

on 27.8.2001. I

I

The Committee in its 6Ci" meeting was informed that t communication from

MIs HMT Ltd. was received stating that a turn-around plan Ifor the company has

been approved by the Central Government and subsequent to implementation of. I

the said plan they would be in position to repay the outstan~ing dues. It was also

informed that MIs HMT Ltd submitted following offers:

1. In case the payment is desired by cash bnly, we would like tooffer One Time Settlement in line wit~ the other financialinstitutions like UTI, lOBI, etc. where w,have paid principalplus 25% of the simple interest in 5 quarterly installments. Acopy of the OTS letter from UTI and lOBI are enclosedherewith.

Alternatively, we would like to offer S,cured Bonds in the"Bonds-A' op.tion for the principal am~nt, carrying rate ofintere~t of 12% per annum in lieu o~ the existing Bonds byswapping/replacement. In respect of Interest due as on date,we would like to issue "Bonds-B" whichlwill carry 6% rate ofinterest, as at present there is no interest on interest.

I

As. the two rates on Bonds A & B for ~rincipal and interestseparately are not favorable, we are Iwining to have oneconsolidated Bond for principal plus interest carrying rate ofinterest between 9-10%. i

i

2.

3.

\

The matter was deliberated by Finance & Investment ICommittee in its 61st

meeting and after detaited deliberations the Committee re40mmended that MisHMT Ltd.s offer of three years single Bond for principal Pluslinterest at the rate of10% interest per annum payable semi-annually for 3 years t,nure with call option

I

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every year may be accepted only with the condition that ~rities may also becharged against their properties at Bangalore if same arel marked for disposalapart from their proposal of charging the same against their ~nencumbere~ land atPinjore and Ajmer of about 500 acres. It was further r! mmended that thesettlement proposal must be ratified through a consent deer in a court of law.

Portfolio Manager has reported that MIs HMT Ud. has agreed in principal to

encumber some of their properties in Bangalore but no formal relSed proposal has beenreceived along with details of their properties proposed. to be charged at Bangalore,Pinjore and Ajmer.°

• I

- SBI, the Portfolio Manager was asked to negotiate with t HMT authorities forgetting a deal on re-issue of composite bonds with 12% retum as i icated in option NO.3of their proposal. MIs HMT Umited clarified following iSSues.

I

1. As regards period of repayment under ore Time Settlement(OTS), the amount will be arrived at after cpnsidering waiver of75% simple interest i.e. principal plus 25% srmple interest will bethe OTSamount. 25% of the OTSamount Will be paid as down

I

payment on cut off date and balance in 4 QU1rterlYinststments.In case of Bonds (option "A" and option "a") the repaymentperiod is 3 years with call option at the end!of each year. Theyare also willing to offer a single Bond for prirlcipal plus interest at10% interest p.a., payable semi-annually fait 3 years tenure with

2.

call option every year.3.

!

As regards details of securities proposed to b I

has written that the surplus unencumbereAjmer, of about 500 acres will be charge

charged, HMT Ltd.,

land at Pinjore anThe value of the

proposed property is estimated around Rs.2 .00 crores.HMTLtd. has orally confirmed that if the ter. s of settlement areacceptable, then an out of court settlement c, n be worked out.

I

HMT Ltd. is willing to discuss and settle f1micably the issuesI

regarding court fees, stamps paper and legal I charges.I

I

In the 62nd meeting of Finance & Investment commi~' e held on 25.5.2001,it was decided that State Bank of India may negotiate wi~h s HMT Ltd. and get aconcrete proposal from them and the same may be putup efore the Finance &Investment Committee for taking decision in the matter. Offi rs from Employees'

,

Provident Fund Organisation should also remain present in ~e aforesaid meetingwith MIs HMT Ltd. Accordingly, a meeting was held 9n 7.62001 with therepresentatives of Mis HMT Ltd., minutes of which are enclosed, according to

I

4.

50

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whi~ a concrete proposal was to be submitted by Mis HMt Ltd. after reconcilingthe outstanding principal amount and interest thereon. I

Instead of giving any concrete proposal for settlemen of dues Mis HMT Ltd.has stated vide their letter dated 20.6.2001 {Copy enclosed that as per the termsof bond issue, only simple interest at the coupon rate of 1 % is payable and theinterest liability ceases on maturity. Due to this fact alon , Mis. HMT Ltd. hasindirectly desired the waiver of 16.22 crores. State Bank of India has desiredadvice on the proposed one time settlement vide letter d ted 27.6.2001 (Copyenclosed). It is, further, informed that Mis HMT Ltd. is goinQJahead in its plans tosell their various properties at Bangalore without earmrrking any funds forrepayment of dues to CBT, EPF. . I

The matter is accordingly placed before the Committ~ for consideration.I

II,,

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EMPLOYEES PROVIDENT FUND O;ANISATIONHEAD orncs, NEW DELI L

NOTE I .

I .

The Finance & Investment Committee dec ed in its 62nd meeting heldon 25.5.2001 that " It was decided State Bank f India may negotiate withHMT Limited and get a concrete proposal from and the same may be putup before the Finance and Investment Committ for taking decision in thematter." Accordingly, a meeting was fixed at re on 7.6.2001 betweenState Bank:' of India and MIs. HMT Ltd. gional P.F. Commissioner,Kamataka and Regional P.F. Commissioner (In» nt) were also directed toremain present in the meeting. Following officers f MIs. HMT Ltd. came fordelibrations :-

1. Shri.. K.V. Ramanamurthy,Exec.utive Direct.~r (Finance)2. Shri V. JagdishNayak, Company Secretary3. Sbri K.M. Srivastava, Chief Engineer (C'

, Shri .Contractor, DGM,State Bank of In<If deliberated on behalf ofportfolio manager. '.

,,

"

It is informed that following dehDetja....tions took place in themeeting:-·I

1. It was infoniied that after trifurcation lof MlsHMT Ltd., newlycreated subsidiary company Hindustani Machine Tools Ltd. willtake care of Iiabilities of Bonds isst,kd to Central Board ofTrustees, EPF.The books of accounts of newly created subsidiarycompany has not been flnaUsed. Detcltilswill be-made availabteto the Central Board of Trustees, EPF by the holding 'companyMIs. H.M.T.Ltd. onlv after finalisatlon!of accounts. New BOndsin lieu of old ones were proposed to Ibe issued' newly createdsubsidiary company in acCOrdance with the offer of HMTconveyed vide letter dated 3.3.2001( pyenclosed).

2. Officials of HMTstated that Compan plans to sell Its surpluslands measuring about 50 acres in Sa galore. .Debts payable toEPFOrganiSC\tioncan be securitised t rough a Special PurposeVehicle (SPV) to sell the surplus land~at Bangalore, Ajmer andPinjore and the proceeds can be distri uted amongst creditors.Exact numbers of creditors was not av ilable. However, officialsof MIs. HMTUd. told that there will be only 3 or 4 majorcreditors In the books of Rewly cred'ted subsidiary companyHindustan Machine Tools Umlted. However, It was stressed thatdues payable to the Central Board oflTrustees, EPF cannot beequated with the other creditors. ~ere was consensus thatlions' share of proceeds from the sa of properties should begiven to the Central Board of Trustees, EPF.However, modalitiescan be worked out.

,I

3. Officials of HMT Ltd. agreed that 0fce the arrangement ofrepayment of dues to Central Board 0 Trustees, EPFis agreedto the same can be finalised by way 0 consent decree throughCourt.

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4. As regards security of Bonds, offidals of HMT Ud. tated thatthere is 60 acres of free hold land at Ajmer and abo t 50 acresat ~ngalore. Even If the property will be encumber , HMTwillrequire inbullt provisions regarding permlsslon t sell theproperty and re-pay the outstanding dues through th SPV. Inaddition there is 440 acres land at Pinjore title of wh ch is withthe holding company MIs. HMTUd. However, this I nd cannotbe sold without getting the permlsslon from Govement ofHaryana becausethis land was gifted by government Haryanato MIs. HMTUd. However, they did not envisage an problemin getting permission from Government of Haryana. I

To meet the time limits in the proposed new~. . I Escrow-Mechanism to ensure the payment of interest and . yment ofdebts can be worked out and the deal may be got ed from aprofessional organisation e.g. State Bank oflndia (CAPS)

I

As regards reimbursement of court Ii.le and legal viocunedby the Central Board of Trustees, EPF for filing a suit . Mis.HMT Ltd. It was stressed that amicable settlement in theletter dated 3.3.2001 can not be treated as waiver. Howeverofficials of Mis. flMT stated that they will have to ge~ approvalfrom their ~ in this regard.' I

5.

6

As regards the value of the Bonds HMT officials carne with' acomputation of 25 crores (Principal) plus simple interest $mountingto Rs.20.75 crores upto 31.3.2001(Copy enclosed). As percomputation of State Bank of India, Principal plus outstandinginterest upto 31st May, 2001 was Rs. 65.34 crores. Officials ofHMT Ltd. desired the detailed calculations of outstandiIw dues ason 30.6.2001 and State Bank of India agreed to give the samealongwitb amount of court fee, legal charges etc. within three daysto Mis. HMT Ltd. However. it was stressed that it is the J-fMT Ltd.,who defaulted in the payment of interest and Princi~' in time.Hence, they are liab.Ie to the .in.terest on interest also. In suitsagainst Mis. HMT Ltd. outstanding dues have been calc ted. onthe basis of compound interest only.

III

Officialsof Mis. HMT Ltd. stated that Canara Bank has agreed toacquire their surplus land in lieu of their outstanding debt$. CentralBoard of Trustees, EPF may also consider the same. :

I

After reconciling the figures of outstanding principal ambont. andinterest thereon, Mis. HMT Ltd. will prepare a concrete iproposalfor perusal by. State Bank of India and Finance & InvestmentCommittee. I

7

"~~~~b~( .1:ANEJA)

Regional Provident Fund Commissioner(In'fstment),

Ig:( I

. MTBHAVAN.

5Road.-510032 •

3330333I HNDMACHIN

~.x;0845-2311

AX: 91-30-3339111. -Mail: ctIoOhm1bgl.nic:netnic.in

March 3, 2001.r ~;I

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Dear Sir, . 't..~ _.\ L' I ~L' r:

Sub: Investment on behalf d CBTEPF ~ 16% HMT ~ f) YVL

We thank you for your letter No.TRlPMS12370 dat~ 25I2l2001 on the c.f -<I' \' ~~subject cited above. As desired by you. the necessary rIB are furnished 10'\ /

hereunder· i ~ (i/vr /.hj.'1. In case of OTS, the repayment is very clear Le. the =. lount arrived at after )

considering waiver of 75% simple interest i.e. princi·· I P.'US 25% simpleinterest will be the OTS amount. 25% of the OTS .ount will be paid asdown payment on cut off date and balance in 4 quartet(ly instalments.

In case of Bonds option 'A' and option 'B' for prif1Cipai or interest orcombination of both the period is 3 years with call Option at the end ofeach year. However, subsequent to this, we have considered theresponse of our investors in {his regard and it has bll! decided to offer asingle Bond for total amount (pri~al plus intere9t~ 100J. interest p.8.payable semi-annually for 3 years tenure with call optir every year:--

The details of securities proposed to be provided a31the surplus land at

Pinjore and Ajmer unenrumbered of about 500 acr . The value of theproposed property is estimated to be around RS.250 crores. Against thiswe are planning to issue Secured Bonds of Rs.150 cr res.

c:(' 83/83/2881 17:87 3339932 HMT LTD/EDF

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The Oy. General Manager (PMS&CS)State Bank of India,Treasury Department.Corporate Centre,Mumbai - 400 021

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The above revised offer of Bonds at 10% p.a. payabl semi-annually onprincipal plus interest outstandiryg is acceptable to some of investors and we-nope the--same win alOODe acceptable to you.

As regards Court fees, stamp paper, legal charge etc. incurred byCBTEPF, you may please let us have the details so that can discuss andsettle amicably.

We are eagerly \\'Biting for your favourable decision in TiS regard.

Thanking you,

Yours faithfully,;r:::(K.V. Ramana rt)

Executive Director (Fin.r~a

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The Deputy GenenII MINIer (PMS • CS),T~DIpai"r"""Cotpot•• Cenh.8tIIte ••• ~ fnd6a.PostBox No.12.IM"'·_,,· ~

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51;.,7£ 3,;~;K OF !t:OIA- EPF MA!N ;,CCOUtH OS-JUr.-'CCl~

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F"" .•. ~ 'I."" PRl ;~CIPAL ~,!..TE DUE R.C.! B;",,;.t:<.; E Wi. t:o lNi£RE:;l unov~.:.v IB.,i

.;r·~OUNT OF DATE uno OF 3~-:;-~~O' n~m~ALLOT OUt DATE OA'lS DUt O:'7E

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------ ------------------- -------------------_ .. ------ .._--------- - ----- ------------------------------------ .------------ ~:'9 1:,)0,000,000 02-Aug-94 02-,!.,iJg-gg 16.00~ S5.S7~.C82 507 27,2Z1,S18

:n ~o,ooo,ooo C2-Au9-S!' CZ-Avg-S9 1S.CC~ 26. ':~2.~&t Eo"" '3,457,53~...,.., •... ,

63 100,000,000 02-,t..lJS-g~ 02-Aug-9S ~6.ao~ 56,565,7:.3 601 n,'J~,N7..:..-- -- ---------- ---------- ...--- ------- ------ - - ------------ ---- -- ---- ---- ---- ---'--'- -----------------_ .._------- ------. ~

139 , 686 ,301 ('7,81J,699---,----'-_ ..-. _._---

- ... TOTAL __ .250 •.000..,000, - -~-----------------------------------------------------------------------------_._--------------------------------------

FROt~

cursr .....NDING 'INTERES.T DETAILS

INTEREST F~OH 1.04.2001 TO 3~.5.~001

01-.Jan-96Oi-Ju'-<~~01-Jan-S7OJ.-Jan-9801-Jan-9901-Jan-20'

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30-Jun-9& 17,500,000 ~~*31-0ac~S& 20,OO{l,COO31-06C-'97 ~O>OOO,OOO31-0ac-98 40,000,000~1-0ac-99 40,000,00031-OsC-20 ~C,OOO;COO3-1--Ha-r--n--,ti,mm I 000

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2~O,000 ,000 e. , s 7S, 3t.Z~----------------------------------

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State Bank of India Posl Box Net: 12, t.tumbal~ 021. .~ : 2045468 12028r,9 I 2868220

<rnITalagram : APEX I

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~nancial Advisor and Chief Accounts Officer.Employees' Provident Fund OrganisationCentral Office, HUDeO Vishala,Bhikaji Cama PlaceNew Delhi - i10066

L TR/PMSCS/SM/If 1" sDellr r. /No ..,Investment in 160/0 HMT Bonds 1999One Time Settlement Proposal by HMTW'

~ 1~.June, 1

I

The exact amount of your claims under the above bonds, to be conSi~ered in anysettlements with HfvlTwas under our examination. Accordingly, we claimed onHMT on 13.06.01, an amount of Rs 62,62,67,793.22 based on interest onoverdue amounts@18%p.a.,compoundedathalfyearlyrestsonc;upondatesfor the amount of unpaid interests and redeemed part of prin ipal, up to31.05.2001., plus the legal costs. This covered the total amount und r the issuei.e., the amount under the two suits. i

I

2. Hr.1T have now responded that the amount claimable Will be Rs46,40,75,342.00 , being the unpaid principal and interest up t~ the finalredemption date without any compounding or penal rates and simpl interest @16% from the final redemption up to ~1.05..91., only on the princi I amount.They have advised that the difference in our claimed amount. with theircomputed amount is due to the interest compounding, and the sftme is notadmissible. I

3. The Bonds carry simple half-yearly interests during their life time and interestwas to cease on final redemption date. However, there was no mention ofoverdue interest liabilities in cases of failures to service interest a~ prindpal.While this can not be a ground for HMT's not paying any overdue' in~rests, therate of interest applicable perhaps will be as adjudicated by a Court1Law or bymutual agreement.

4. In view of the above, please consider and advise us, what will be ~e basis foroverdue interest daim under a compromise settlement and thereb how muchamount you decide to be your claim on HMT, that can be used as a basis fordiscussions for the proposed One Time Settlement.

~I:1Ut.y. General Manager5)

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