Hyderabad, Jan. 20
ALLAYING the fears of life insurance players on their prospects in the pension funds arena with the formation of new pension fund regulator, a senior official of the Union Finance Ministry said options were still open on their entering the pension funds segment.
Addressing the Ninth Insurance Summit organised by the Confederation of Indian Industry (CII) here on Thursday, the Joint Secretary for Capital Markets and Pension Reforms, Mr U.K. Sinha, said the Government also kept the options open to permit more pension funds (PFs), though it was decided to restrict the number of PFs in the initial stage.
Talking to presspersons on the sidelines of the summit, Mr Sinha, however, declined to throw further light on the prospects of life insurers in the new regime. Stating that "the options are kept open", he refused to define the exact role the life insurers could expect to play in the new pension system (NPS).
On restricting the number of PFs in the initial stages and to grow them based on increase in number of participants, Mr Sinha said the international experience supported this approach. He said that stringent technical standards would be laid for the entry of PFs. The cost and fees would act only at second stage of selection criteria, he added. "We are planning to release the discussion paper on fresh set of regulations pertaining to selection of PFs," he said.
Stating that the statutory Pension Fund Regulatory and Development Authority is being constituted with three whole-time members and a Chairperson, he said the Government expects the national pension scheme (NPS) to take off in the next 12 months.
For the proposed Central Recordkeeping Agency, the Government has so far received interest from half-a-dozen domestic players and a couple of foreign institutions. The domestic players include the National Securities Depository Ltd, Central Depository Securities Ltd, UTI and Stock Holding Corporation.
Responding to the issues raised by participants on restriction on FDI limits and the problems of tariff regime in the insurance industry, the Chairman of Insurance Regulatory and Development Authority, Mr C.S. Rao, said further liberalisation of the sector would be made as the industry matures.
He was of the view that increased competition among the insurance players of late was leading to some of the insurances resorting to unsound practices. The authority has plans to introduce incentives for good practices and slap penalties on violators, he stated.
According to the New York Life Senior Vice-President, Mr George Nichols, the road for the Indian insurance industry appears very bright if the past were any indication . He advised the Indian insurance regulator to protect the interests of policyholders and insurers by setting high standards for the intermediaries.
Citing the example of increasing penetration of new products in the insurance arena such as unit-linked products, he suggested different types of licences for the intermediaries to sell different types of products.