New Delhi: In a move that could materially widen access to pension products, the Pension Fund Regulatory and Development Authority (PFRDA) board has given an in-principle nod to allow scheduled commercial banks to directly set up pension funds to manage the National Pension System (NPS). The move is expected to deepen distribution and increase competition among fund managers.
The proposed framework seeks to address existing regulatory constraints that had so far limited bank participation in the pension sector, the finance ministry statement said on Thursday. By introducing a clearly-defined eligibility criteria based on net worth, market capitalization and prudential soundness in line with Reserve Bank of India’s norms, the government will ensure only well-capitalized and systemically-robust banks are permitted to sponsor pension funds.
Detailed norms are expected to be separately notified by the ministry. These norms will apply to both new and existing pension funds.
“The current requirement of a company with at least ₹50,000 crore AUM (assets under management) is a limiting factor, especially for banks that don’t have (that level of) AUM to directly set up a pension fund management company,” said a senior official at a pension fund company who did want to be named.
This means banks have so far had to rely on their mutual fund or insurance arms to set up pension fund companies. But now that banks can become direct sponsors, the move will also augment distribution of NPS since banks will have more control, said the official quoted above.
Banks have been keen to directly enter the pension fund business. Earlier, ICICI Bank got RBI’s approval to acquire full control ICICI Prudential Pension Funds Management Co. Ltd, pending approval from the PFRDA.
The PFRDA expects these reforms to help subscribers and stakeholders access a more competitive, well-governed and resilient pension ecosystem, leading to improved long-term retirement outcomes and enhanced old-age income security, the ministry statement said.
Moreover, to align with evolving realities, aspirations of the public, international benchmarks and the objective of expanding coverage across corporate, retail and gig-economy segments, the pension regulator has revised the investment management fee (IMF) structure for pension funds to safeguard subscriber interests with effect from 1 April 2026, the statement said.
The revised slab-based fee introduces differentiated rates for government and non-government sector subscribers that would also apply to schemes under the multiple scheme framework (MSF), with the MSF corpus being counted separately.
The finance ministry said the pension regulator has appointed three new trustees on the board of NPS Trust. The new trustees include Dinesh Kumar Khara, former chairman of State Bank of India; Swati Anil Kulkarni, former executive vice president, UTI AMC trustee, and Dr. Arvind Gupta, co-founder and head of Digital India Foundation and member of the National Venture Capital Investment Committee under the Fund of Funds Scheme managed by SIDBI. Khara has been designated as the chairperson of the Board.
(With inputs from Deepti Bhaskaran)
