The Hindu Business Line : Rs 50-cr net worth proposed for pension record-keeping agency

THE Central Record-Keeping Agency (CRA) for the pension sector is emerging, with the Government considering a proposal to stipulate a minimum net worth of Rs 50 crore for bidders along with a five-year experience in record-keeping and semi-regulatory functions.

The final draft for the CRA, presently with the Ministry of Finance, has also proposed that the aspirants should have an experience of handling at least three million individual accounts and five million transactions per year.

The CRA would be the hub of the pension sector as it would be responsible to maintain details of all personal retirement accounts (PRA), including their transaction details in the proposed new pension structure.

The draft for the CRA has recently been submitted to the Finance Ministry by the Invest India Economic Foundation (IIEF), who are the consultants appointed by the Government to assist in preparing the framework for ongoing pension reforms.

During the run-up to the final draft extensive consultations had been held by IIEF with the top brass of the Ministry of Finance and the interim Pension Fund Regulatory and Development Authority (PFRDA). The views of those interested in participating in the future pensions market, including insurance companies, fund managers and foreign agencies dealing with pensions had also been sought.

Those figuring in the list to be allowed to bid for the CRA include public financial institutions, banks, stock exchanges or SEBI-registered depositories and registrar and transfer agents. Also eligible would be a body corporate providing financial services with not than less than 49 per cent equity holding by a bank, FI or a stock exchange.

However, it has been suggested no points of presence (PoP) or a Pension Fund Manager (PFM) would be allowed to hold more than 10 per cent of the equity capital of the CRA. While PFMs would be entities offering pension schemes, the network of bank and post office branches is expected to form the PoP backbone through which individuals would have access to the pension systems to conduct transactions on the PRA.

It has been proposed that the initial licence for the CRA licence shall be valid for a term of 10 years during which no other agency will be granted another licence for the same job. The PFRDA shall start the process of re-bidding for the CRA licence within 18 months of the expiry of the licence of the incumbent agency, the paper says.

According to the time frame set out by the IIEF, the CRA is expected to be fully functional within 12 months from the date of acquisition of the licence. While the first phase of implementation of the CRA of around eight months would go into preparation of the system architecture with electronic connectivity, the next four months would see the agency CRA facilities such as switching between schemes and opening of withdrawable accounts. Another three months after that, the agency is expected to provide high-end service through the use of the Internet and telephones.