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Sarbajeet K. Sen

New Delhi , Sept. 5

WHILE foreign direct investment in insurance is still struggling to get close to the halfway mark, FDI in the pension sector could well travel the full distance in the first burst itself.

A strong opinion is building within the Finance Ministry that 100 per cent FDI should be allowed in the pension sector once it is opened up for entry of new pension fund managers (PFMs).

"There appears nothing wrong in allowing 100 per cent FDI in the pension sector. There are so many sectors which have 100 per cent FDI," a senior Finance Ministry official said. However, they said that no final decision has been taken yet.

The view gaining ground is that a strong regulatory framework with stiff prudential norms on investments and proper guidelines on management of accumulated pension funds should help in removing any doubts that the public might have on parking their savings with entities that are 100 per cent foreign owned.

Pension reforms are still in its nascent stage with the Government currently firming up its mind on whether to have a separate regulator for the sector or to hand over the job to the Insurance Regulatory and Development Authority. After a regulatory framework for the pension sector is put in place, the Government plans to allow the regulator to licence a few PFMs who would be allowed to canvass for investments from subscribers.

The funds would be managed and invested by the PFMs till the payment of annuities that is to be handled by the life insurance companies.

If the Government finally allows 100 per cent FDI in the sector, it would come as a major relief for those waiting in the wings to enter the Indian pension sector. These players, which include foreign partners in Indian insurance companies and global mutual funds, have been keenly watching the developments on FDI in the insurance sector to take a cue for what may be in store for the pension sector. The signals, however, from the insurance sector have not been very heartening.

The United Progressive Alliance Government's plans for hiking the insurance cap from the current 26 per cent to 49 per cent have run into trouble from the word go. The Left parties that provide outside support to the Government have come out openly against the move to raise the cap.

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Govt considering 100 pc FDI in pension sector

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