The Hindu Business Line : Govt may opt for pension, insurance under IRDA

In what could alter the course of the ongoing pension reforms, the Finance Minister, Mr P. Chidambaram, may veer towards making the Insurance Regulatory and Development Authority (IRDA) the regulator for both the pension and insurance sectors.

This will be contrary to the pension reforms under the National Democratic Alliance (NDA) Government that set up an interim Pension Fund Regulatory and Development Authority. The NDA also initiated the process of drafting a Bill to transform the interim body into a statutory one.

However, Mr Chidambaram is understood to have questioned the logic of setting up a separate regulatory body for the pension sector at a recent meeting with the representatives of some of the leading insurance and mutual fund companies, who plan to become major players in the Indian pension market. Those present at the meeting included senior Finance Ministry officials and representatives of the India Invest Economic Foundation, who are the Government's consultants on pension reform.

"The Finance Minister appeared to be in favour of a single regulator for the pension and insurance sectors," an industry source said. However, the source added that the meeting was more of a brainstorming session to understand the industry's views and a formal decision is yet to be taken.

Mr Chidambaram left his options open during the presentation of the Union Budget.

"A suitable legislation to provide a regulatory framework for the scheme (the `defined contribution' pension scheme introduced from January 1, 2004) will be introduced in Parliament," the Finance Minister said in his Budget speech.

The issue of creating separate regulators for the insurance and pension sectors was debated during the initial days of the pension reforms. The debate was sparked off by two reports on reforms in the sector - the Dave Committee and the IRDA report - which took diametrically opposite stands on the issue.

The Dave Committee report suggested the setting up of the Indian Pensions Authority. It said that a separate body was required "to perform a variety of important roles in the institutional arrangement of the pension sector."

However, the IRDA report that came a few years later strongly favoured the two sectors being under the insurance regulator's roof.

"It would be ideal if we do have one regulator who looks after both the pension and insurance areas," the IRDA said.

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