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The government has notified an increase in the cap on foreign direct investment (FDI) in the pension sector to 49 per cent from 26 per cent, paving the way for more foreign funds to enter the national pension system.
The increase in FDI cap for pension is in sync with the recent passage of the Insurance Laws (Amendment) Bill in Parliament, which allows a higher, 49 per cent foreign investment limit in the insurance sector.
The cap on foreign investment is composite and includes FDI, foreign portfolio investments (FPI) and investments from NRIs, according to a press note released by the Department of Industrial Policy & Promotion (DIPP), on Monday.
While FDI up to 26 per cent will be allowed through the automatic route, investments above that will have to be routed through the Foreign Investment Promotion Board (FIPB).
The Pension Fund Regulatory and Development Authority (PFRDA), 2013, pegs FDI in the pension sector at 26 per cent or such percentage as approved for the insurance sector, whichever is higher.
The increase in the foreign investment limit in the pension sector comes with certain riders. “Foreign investment in pension funds will be subject to the condition that entities bringing in foreign equity investment shall obtain necessary registration from the PFRDA and comply with other requirements as per the PFRDA Act…,” the notification said.
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