A House Panel has asked the Government to spell out the foreign investment policy in the crucial pension sector in the PFRDA Bill 2011 itself and not outside the proposed legislation.

The Standing Committee on Finance has also recommended that the foreign direct investment (FDI) in the pension sector may be capped at 26 per cent.

The Standing Committee’s recommendation on the FDI cap is in line with the Government stance that foreign investment in pension sector be capped at 26 per cent on par with the insurance sector.

On the issue of spelling out foreign investment policy in the PFRDA Bill 2011, the Standing Committee has noted that the pension fund managers holding the stake of the old age income security of their clients cannot be compared with other agencies/companies/institutions in the financial sector and therefore the investment policy must be spelt out in the Bill itself.

Currently, there is no provision in the Pension Fund Regulatory and Development Authority (PFRDA) Bill 2011 on the issue of policy for FDI in pension sector.

This is because the Government is in favour of spelling out the foreign investment policy for pension sector intermediaries (including the pension funds and central recordkeeping agency) under the Foreign Exchange Management Act, 1999.

The Government had told the Parliamentary Panel that spelling out the foreign investment policy in the pension sector under FEMA was in line with most of the recent legislations in the financial sector, where foreign investment is determined under FEMA. However, the Standing Committee is not in favour of such an approach for the pension sector.

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