NPS asset growth impacted by Ukraine conflict, tough market conditions: PFRDA

Pension regulator PFRDA sees the overall pension assets growth under National Pension System (NPS) falling short of the declared aim of ₹7.5-lakh crore by end March 2022. The volatility in equity and debt markets over the last few months — exacerbated by the latest Ukraine-Russia conflict — has impacted the growth in pace of pension assets this fiscal, Supratim Bandyopadhyay, PFRDA Chairman, has said.

“We will fall short due to the prevailing market conditions. We have made all efforts. We are now at ₹7.19-lakh crore and we could have grown faster to about ₹7.35-lakh crore but for the market conditions. Achieving ₹7.5-lakh crore at this stage looks a distant unless the markets see a significant rise in March,” Bandyopadhyay said. 

At the same time, Bandyopadhyay expressed confidence that things will look up immediately if the geopolitical situation improves. “We really don’t know how and when things will get resolved at the Ukraine front,” he said.

This pressure on NPS pension assets growth also comes at a time when more and more States believe it is not politically expedient to be part of NPS or adopting NPS. A case in point is Rajasthan, which in its recent Budget announced its decision to move out of NPS. Political parties in the run up to the ongoing Uttar Pradesh assembly elections have promised in their election manifestos of their intent to move to a defined benefit scheme and move out of NPS.

TN, West Bengal

Large States like West Bengal and Tamil Nadu ( which showed initial intent but stayed away) are still not part of PFRDA regulated National Pension System. 

Bandyopadhyay said that Pension Fund Regulatory and Development Authority (PFRDA) is in touch with both West Bengal and Tamil Nadu and looking to convince them to adopt NPS. As for Rajasthan, he said that PFRDA has so far not received any communication from Rajasthan Government conveying their decision to move out of NPS.

On Tamil Nadu, Bandyopadhyay said: “I think they (Tamil Nadu) are not technically even part of NPS. Because they initially wanted to join NPS but never joined NPS. It is not only West Bengal. Even Tamil Nadu also. There was a notification issued by the Tamil Nadu government in 2003 and that is well documented. That is even before central government came with its NPS notification. 

“So TN govt had all the intention to join NPS and thereafter there was a second thought. No money was deposited with our NPS Trust and system. That is the status. We are trying. As a regulatory body, we can tell them this is in your interests to join NPS. But it is finally their decision to join or not to join.”

Equity, debt markets

Indian equity markets have seen huge volatility in the last six months, driving down benchmark indices by over 10 per cent on the back of foreign portfolio investors dumping about $14 billion worth shares so far since September last year. A robust flow of retail monies flowing into equity markets has only partly helped stem the downward correction markets, which was also impacted by exogenous shocks like Ukraine conflict and impending US Fed interest rate increase.

“In equity markets we have seen huge volatility and corrections. Debt market is also seeing hardening of interest rates (almost 100 basis) —quite a bit in last six months. Otherwise, we could have been at AUM of ₹7.35-lakh crore by now,” Bandyopadhyay said.

India’s NPS AUM has been recording compounded annual growth of over 30 per cent in recent years. Pension AUM as of end March 2021 stood at ₹5.76-lakh crore as against ₹4.17-lakh crore as of end March 2020. In fact, PFRDA was not only aiming for pension AUM of ₹7.5-lakh crore by March 2022, it had also announced that it was on path to reach a projected level of ₹30-lakh crore by the year 2030.

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