The Hindu Business Line : Minimum capital for pension fund managers may be fixed at Rs 25 cr

THE interim Pension Fund Regulatory and Development Authority (PFRDA) is considering setting the minimum paid-up capital requirement for pension fund managers (PFM) in the proposed New Pension System (NPS) at about Rs 25 crore.

This would be a deviation from the insurance sector where the minimum capital has been set at Rs 100 crore.

"We are thinking of setting the initial paid-up capital for PFMs in the region of Rs 25-30 crore which can go up gradually depending on the growth of business," the Chairman, interim PFRDA, Mr D. Swarup, told Business Line.

He said that the principal reason behind thinking of a lower capital requirement for PFMs, as compared to insurance companies, was due to the basic difference in their nature of operations. "PFMs would only manage the pension funds.

The accumulations and the investments would not reflect on their balance sheet. On the contrary, the pooled investments by insurance companies are done through their balance sheet," Mr Swarup said.

The Finance Ministry had also argued on similar lines before the Standing Committee of Parliament that scrutinised the PFRDA Bill. "PFMs would be managing the individual retirement accounts not through their own balance sheet, something like an Asset Management Company. So capital requirement would be different and need not be too much emphasised," the Ministry had told the Committee in a written deposition. The Standing Committee had placed its report before Parliament during the initial days of the current monsoon session.

The Ministry had also argued that unlike the insurance sector where the legislation for setting up the IRDA had the capital requirement for insurers incorporated in it, the decision on capital requirements for the pension players should be left to the PFRDA. "Pre-requisites relating to capital structure, basic rules and regulations/qualification etc will be provided in the regulations to be framed by PFRDA which will be subject to Parliamentary scrutiny," the Ministry had said.

However, the Standing Committee has not concurred with the Ministry's views. "The capital structure and experience criteria for selection of PFMs need to be spelt out in clear terms in the PFRDA Bill itself," the panel has said.

The report of the panel is being discussed at the highest level in the Ministry. Most of the suggestions for amendments to the PFRDA Bill are likely to be accepted.

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