The Hindu Business Line : Govt in talks with banks on pension delivery mechanism

THE Ministry of Finance has opened up yet another flank in its pension reforms offensive by initiating talks with the banking sector for creating the countrywide framework of points of presence (PoPs) for the proposed new system.

The PoPs structure would be the backbone of the new pension system being the delivery mechanism through which subscribers would operate their individual retirement accounts (IRA).

"We have already held talks with a couple of banks to explore how they could participate in the pension structure," a senior Finance Ministry official said.

He, however, declined to name the banks with which preliminary talks have been held since it would give `disproportionate publicity' to them in view of the fact that many more banks are ultimately likely to take up the task.

Besides ascertaining the preparedness of the banking sector for participating in the pension sector, the Government is also keen to know the fee structure to be charged to make it viable for the banks to offer such services. The fees attached with the delivery mechanism of the pension structure is a major concern of the Government's since its intention is to keep the overall costs attached to pension transactions to the minimum.

The PoPs would be the platform for the interface with between the subscriber and the new pension system. The points would be use for collecting contributions and allowing the subscribers to access their retirement accounts. Besides bank branches, the network of post offices across the country are expected to operate as the PoPs.

The need to have an extensive structure of "hundreds of thousands" of PoP locations was first suggested by the Dave Committee in its recommendations for pension reforms. "The individual would be able to visit any PoP in India (not just the PoP where he had opened the IRA) and conduct transactions on his IRA," the committee had said.

It has suggested that every PoP should exhibit identical features, process and procedures. For a wide reach, the Dave Committee had said that besides bank and post offices, other points of presence could be depository participant offices and "other locations from which electronic connectivity into a central computer system is possible."

Under the proposed pension system, the PoPs would be connected online to the Central Record-Keeping Authority (CRA). The CRA in turn would maintain the records of all the transactions conducted by a subscriber at any PoP and the instructions issued by the individual on his or her retirement account.

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