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Pension regulator PFRDA will soon frame guidelines to bring clarity on the FDI policy in the pension sector, its Chairman Hemant Contractor said.
The new guidelines are being framed at the behest of the Central Government to provide foreign investors with all the clarity on investment norms at one place.
Currently, the foreign investment regime for pensions is largely linked to the one prevailing in the insurance sector, especially with regard to the FDI cap which is pegged at 49 per cent. Any pure-play foreign pension player has to look at the FDI policy on insurance before firming up investment decisions in the pension sector.
“The government has now asked us to frame guidelines. They (government) have said that both direct and indirect investment should be considered. There was a question mark on what would constitute foreign investment — direct only or both direct and indirect,” Contractor told BusinessLine .
One of the issues that requires clarity is how foreign investment at the level of sponsors of pension fund managers be counted to determine the FDI cap at the level of pension entities.
It is expected that the proposed guidelines — which when finally issued by the Department of Financial Services — will throw light on how foreign investment levels will be computed for downstream companies in the pension sector.
“The guidelines (on FDI policy) will cover who can come in, how indirect investment will be computed for sectoral caps. It will also look into the ‘control aspect’,” Contractor said.
Letter to States
Following the Centre’s recent decision allowing its employees to opt for private pension fund managers to manage their NPS monies and also have higher equity investments, the PFRDA has written to the States to allow similar flexibility for the State Government employees’ who are NPS subscribers.
“If States also agree to this and give their employees wider choice in selection of PFMs and permit equity investments up to 50 per cent, then there will be a big jump in the incremental flow of monies into the equity market,” Contractor said.
Contractor, who will superannuate this month, pointed out that State Government employees account for twice the contributions of the Central Government employees for NPS.
As of end March 2019, the total subscriber base to various pension schemes overseen by the Pension Fund Regulatory and Development Authority (PFRDA) stood at 2.74 crore, a jump of 30 per cent during 2018-19. Total assets under management (AUM) for the sector stood at ₹3.19 lakh crore as at end March 2019. AUM grew by ₹84,000 crore during 2018-19, official data showed.
PFM minimum capital
Meanwhile, PFRDA is also contemplating an increase in minimum capital of pension fund managers to ₹50 crore, from ₹25 crore.“We plan to change regulations for this (increase minimum capital requirement). We want the PFMs to provide more infrastructure,” Contractor said.
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