To incentivise points of presence (PoPs) such as banks and broking firms to enrol more people under the National Pension System (NPS), the Pension Fund Regulatory and Development Authority (PFRDA) should allow higher initial subscriber registration charge, according to a top official of a pension fund management firm.

Though this charge was raised to ₹200 in October 2017 from ₹125 earlier, the official said that it needs to be suitably hiked further so that PoPs feel incentivised enough to actively distribute NPS.

“If we evaluate the charge in terms of banks which have the maximum reach, probably it does not cover the employee cost for them...So, this is something which has to be fixed.

“...It is a laudable objective to reduce the costs but a balance has to be struck. If it (the charge) is not generating enough interest in the PoPs, which have the widest reach to propagate the scheme, if they don’t feel incentivised enough, NPS penetration will continue to be low,” said Kumar Sharadindu, MD and CEO of SBI Pension Funds.

NPS is a voluntary, defined contribution retirement savings scheme designed to enable subscribers to make optimum decisions regarding their future through systematic savings during their working life. The scheme seeks to inculcate the habit of saving for retirement amongst the nation’s citizens.

PoPs perform the functions relating to registration of subscribers, undertaking know your customer (KYC) verification, receiving contributions and instructions from subscribers and transmission of the same in the NPS architecture. As on October 30, there are 134 entities, which have registered themselves as POPs for NPS. These include banks, broking firms, housing finance companies, and AMCs.

“While the fee for PoPs has been increased, it is not attractive enough. Otherwise, they would have been gung-ho, particularly in the existing challenging times which the banking industry, especially public sector banks, is going through. Any source of income would be highly welcome.

“As far as SBI is concerned, it does open the largest number of (NPS) accounts every year...But there are certain public sector banks which are not doing anything on this front. I would suppose, they don’t see much incentive to do this (open NPS accounts) over some other things (such as recovery, as balance sheet strength comes from this activity),” said Sharadindu.

Out of the total subscriber base of 2.24 crore under the NPS as at July-end 2018, the ‘all citizen’ category, comprising individuals (other than those under the NPS Lite-Swavalamban and Atal Pension Yojana categories), accounted for only 7.22 lakh subscribers. In terms of numbers, the largest NPS subscriber category is the Atal Pension Yojana (1.07 crore). There were 59.21 lakh subscribers under the government category and 7.25 lakh subscribers under the corporate category.

As per PFRDA data, the total contribution under the NPS grew to ₹2,03,057 crore as of July-end 2018 against ₹1,98,530 crore as of June-end 2018. Government sector subscribers accounted for about 84 per cent of this contribution.

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