State Bank of India [Get Quote], LIC [Get Quote] and UTI AMC are all set to be appointed as managers of the about Rs 2,000 crore (Rs 20 billion) pension funds of Central and state government employees under a new system that allows investing up to 5 per cent of the money in stocks.

Besides these entities, IDBI Capital was shortlisted by the interim pension regulator PFRDA for acting as a fund manager and asked to submit bids.

"Based on the overall evaluation, including technical and commercial parameters, a PFRDA-constituted committee has found SBI, UTI Asset Management Company and Life Insurance Corporation of India as the three best value bidders and recommended their appointment as sponsors of pension funds under the new pension system," an official statement said.

The report of the committee is under consideration of the Pension Fund Regulatory and Development Authority (PFRDA). The three entities will have to set up separate companies and the whole process of managing pension funds could start in the next four to six months, said a PFRDA official.

He said the fund managers will offer alternative products to employees including risk-free options under which all funds will be invested in government securities and share market linked products.

Earlier, Canara Bank [Get Quote], Punjab National Bank [Get Quote] and Securities Trading Corporation of India (STCI) had also submitted expressions of interest, which were turned down by PFRDA.

Only financial service providers, in which government has at least 51 per cent stake and manage assets worth Rs 10,000 crore (Rs 100 billion) were eligible to submit EoIs.

This is an interim mechanism till the Pension Reforms Bill, strongly opposed by the UPA's Left allies, is passed by Parliament.

Once pension fund managers are appointed, PFRDA will allow them to access pension funds of around 500,000 employees of the Central and most state governments.

All states, except the three Left-ruled states of West Bengal, Tripura and Kerala and few others, have switched to the new pension system (NPS).

The NPS, unlike the old system, is based on contribution from employees and employers.