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PFRDA said that PFMs would be allowed to invest only in a handful of instruments, including equities of companies listed in India and regulated by SEBI.

New Delhi , Sept 2

THE interim Pension Fund Regulatory and Development Authority (PFRDA) has proposed restrictions on investments of pension accumulations handled by pension fund managers (PFMs) including disallowing any investments in the overseas markets.

In its draft regulation on registration of intermediaries released on Friday, the PFRDA has said that PFMs would be allowed to invest only in a handful of instruments, all of which are domestic ones.

These include equities of companies listed in India and regulated by SEBI, publicly traded securities issued by the Central Government, traded Indian corporate debt instruments that have been rated as investment grade by at least two rating agencies and loans of Indian micro-finance institutions guaranteed by the RBI. The permitted equities would have to be part of an index approved by the PFRDA.

The interim pension regulator has also proposed to start off the pension reforms by permitted PFMs to float a bouquet of four schemes that would vary on their investment pattern. The investment pattern would range from a 100 per cent Government debt scheme to a growth plan in which up to 50 per cent would be invested in equity-based index.

The draft regulations has been issued to conform to the wishes of the Parliamentary Standing Committee on Finance that had suggested that the broad contours of the regulations governing the implementation of the New Pension System should be first put in the public domain prior to the enactment of the PFRDA Bill.

The PFRDA has said that the final form of the entities that are to be registered as Central Record-keeping Agency (CRA), Pension Funds (PFs) and Points of Presence (PoPs) will be firmed up only after suggestions are received on this issue. PFRDA has suggested various parameters that could be considered for registering entities as Fund Managers including minimum capital requirement, past track record including ability to provide guaranteed returns, cost and fee structure, customer base, information technology capabilities and human resources.

The regulator has said that though minimum capital requirement for the CRA, PFs and PoPs will be an essential criterion for registration as an intermediary, the exact amount would be indicated after getting feedback on the proposed regulations.

To be licensed as a PoP (where the pension subscriber would have direct interactions for transacting on the accounts) the entity should be registered under RBI/IRDA/SEBI regulatory jurisdiction.

The draft has proposed restricting the cross holding of ownership among intermediaries in order to address the issue of conflict of interest.

It has been proposed that PFRDA would have the powers to suspend or cancel licenses.

The draft provides that the net asset value of schemes shall be provided on a daily basis by the PFs.

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