MUMBAI: Opening up pension fund sponsorship to banks could mark a turning point for the National Pension System (NPS), according to Pension Fund Regulatory and Development Authority (PFRDA) chairperson Sivasubramanian Ramann, signalling a push to scale up distribution and deepen investor reach.
Speaking at a fireside chat at the Mint India Investment Summit 2026, held in Mumbai on Thursday, Ramann suggested the move would significantly widen access. “(W)hether it is to be seen as a barometer of the reforms that have been already brought in, but we have four pension funds which are knocking on the door,” he said.
One new pension fund, sponsored by Parag Parikh Financial Advisory Services, has already received a licence, with three more expected over the next 30-40 days, he added.
The broader strategy hinges on expanding distribution, particularly through digital channels. In a market as large and fragmented as India, Ramann argued, digital adoption is critical to achieving meaningful scale.
Smaller than MF
Despite steady growth, NPS remains far smaller than the mutual fund industry. Mutual funds closed FY25 with a record ₹65.74 trillion in assets under management, compared with ₹13.98 trillion for NPS in FY25.
The gap reflects structural differences. NPS is a government-backed, long-term retirement product designed to enforce disciplined savings, while mutual funds offer greater flexibility, liquidity and a wider range of investment options. Market participants say this makes mutual funds more adaptable to varied financial goals, even as NPS anchors retirement planning.
Ramann emphasized the distinction between financial products and NPS, adding that the system is not necessarily meant to function like a mutual fund. He noted that each serves a distinct purpose, and investors need different products to meet different goals.
“Our aim is not to trap an investor and make them a prisoner. The aim is to teach you to be patient. Keep your money for a long time, the power of compounding is just phenomenal,” he said.
Easing rigidity
The regulator has, however, been easing some of NPS’s rigidity. The recently introduced Multiple Scheme Framework (MSF), effective 1 October 2025 for non-government subscribers, allows greater flexibility and choice in investment options.
This marks an evolution in the system’s design, from an initially passive approach to allowing active strategies and a broader investment universe. Ramann likened the shift to building a system with “both an accelerator and a brake,” balancing growth with stability.
Looking ahead, the PFRDA is targeting double-digit returns for NPS investors over the next decade, particularly as government bond yields potentially soften, making diversification more important.
That imperative is sharpened by the scale of long-term domestic capital. Ramann pointed to combined pools from NPS, Employees Provident Fund Organisation, and insurance funds exceeding ₹120 trillion, raising critical questions around deployment and returns.
To address this, Ramann said, NPS has begun allocating a small portion of its corpus, around 1%, to unlisted assets via the AIF route, aiming to capture long-term returns over 25-35 years. It has also introduced limited exposure to commodities such as gold and silver, again capped at about 1% of assets.
