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May 13, 2002 | 1145 IST
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Seamens' PF freezes investments

BS Banking Bureau

The Seamens' Provident Fund has temporarily frozen all investment activity in the wake of the Rs 1-billion hit that it has taken on account of non-delivery of government securities and public sector undertaking bonds by a host of brokers.

Further, the power of investment has been taken away from the commissioner of the PF.

According to director general of shipping and chairman of the fund, D T Joseph," It has been decided not to make any investments till the matter is cleared. Naresh Salecha, senior DG-Shipping, will take over additional charge as the commissioner of PF."

The fund has also made other changes to avoid the recurrence of such fraud in the future. "The power of investment of the commissioner of the PF has been cancelled. All investments decisions will now have to be taken by the full Board of the Trustees," said Joseph.

The decision was taken in an emergency meeting of the Board of the Trustees. A criminal complaint has already been filed with the Banking Securities and Fraud Cell of the Central Bureau of Investigation.

On the problem of repayments, Joseph said, "The fund still has more than Rs 3.30 billion which is kept with the Reserve Bank of India. This money is still with us and there is no need for anyone to panic. No sailor will be affected in the immediate future.

However, over a period of time the shortage will be felt. Between the industry and the government, we will have to decide how to meet the shortfall caused by this problem."

He added, "On an average, the yearly outgo as payments is around Rs 300 million, while the income through investments is at around Rs 320 million."

Incidentally, government auditors never found anything amiss all these years. "It seems the auditors were only concerned whether the investments were made according to government rules," Joseph pointed out.

The Seamens' Provident Fund had invested in government securities and bonds of public sector undertakings through the Kolkata-based Pacific Finance, Dalhousie Securities, Poddar Trading Company and Hooghly Trading & Investments. These companies operated through the Mumbai-based Home Trade and Gilt Edge Management Services.

The fund was formed under the Seamens' Provident Fund Act, 1966. Till 1996, the RBI was in-charge of the funds. However, with regulations changing, the management of the PF moved out of RBI hands.

Since November 1996, the fund started taking investment decisions in house after a board resolution was passed authorising the PF Commissioner in charge of "work of investments".

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