The Hindu Business Line : `Only public sector entities can sponsor pension fund managers'

New Delhi May 21 Foreign or private firms are not eligible to apply to the Pension Fund Regulatory and Development Authority (PFRDA) to take up the role of pension fund managers of the New Pension System (NPS).

The Finance Ministry issued a clarification to this effect on Sunday in the wake of reports that PFRDA proposes to allow foreign and private firms to manage pension funds.

"It is clarified that in terms of PFRDA's invitation to submit Expression of Interest (EOI), no foreign or private firm would be eligible to apply for the pension fund business," an official release said.

Inviting EOI

The PFRDA had on May 11 invited EOI for appointment of pension fund managers for the NPS. The last date for submission is May 25.

The Finance Ministry release pointed out that PFRDA has invited EOI only from public sector entities for sponsoring pension fund managers. As per the EOI, only Government entities, such as Central Government companies, and public financial institutions in which not less than 51 per cent paid up share capital is held by Central Government or partly by Central Government and partly by one or more State Governments can apply.

The selected public sector entity would be required to incorporate the pension fund manager as a separate public sector company. Both the sponsor and the pension fund manager would, therefore, be in the public sector. Direct or indirect foreign investment in the pension fund manager, if any, should not exceed 26% of its paid up share capital. This is in accordance with the report of the Standing Committee on Finance, which examined the PFRDA Bill, 2005.

Further, to be eligible, the sponsors must have at least five years experience of fund management and average assets under management of the sponsors must not be less than Rs 10,000 crore for the month of March 2007. Thus, even amongst public sector entities, only those with sufficient experience and financial strength can apply, the release added.