Widening NPS fund manager choice stuck on FDI norms: PFRDA Chairman
The present FDI norms could create problems not just for the new applicants, but also for the existing pension fund managers.
Sarbajeet K Sen
The Pension Fund Regulatory and Development Authority’s (PFRDA) efforts to offer a wider choice of pension fund manager (PFM) to investors in the National Pension System (NPS) has hit a roadblock on existing foreign direct investment (FDI) norms for the pension sector.
Chairman, PFRDA, Hemant Contractor, told Moneycontrol that the pension regulator is in talks with the government for clarity on the present FDI norms, which threatens to not just effect the new applicants, but could create problems for the existing fund managers as well.
“We came out with the Request for Proposal (RFP) some time ago. However, we have not been able to disclose the selection details because there are some FDI issues relating to the pension sector that needs to be sorted out. We have sought clarity on the existing RBI guidelines under FEMA. We are in talks with the government,” Contractor said.
Contractor said that while the FDI cap for the pension sector is set at 49 per cent, there are issues regarding computation of foreign direct investment. “The FDI norms for the pension sector provides for direct and indirect FDI within the overall cap of 49 per cent. The manner in which it has to be computed is currently being discussed. The government has some ideas on how we should look at it. The proposed manner of computation can adversely impact the existing present PFMs as well. These issues need to be sorted out. We have had several discussion with the government on this,” he said.
However, Contractor did not want to go into details of the pension regulator’s deliberations with the government.
The government had increased the FDI cap in the pension sector to 49 per cent a couple of years ago, with conditions on ownership and control. In February 2016, the government had allowed 49 per cent FDI in pension sector through the automatic route. That meant that investors were not required to go through the erstwhile Foreign Investment Promotion Board (FIPB) to invest in pension sector within the 49 per cent cap.
The FIPB has recently been abolished and individual departments of the government have been empowered to clear FDI proposals in consultation with DIPP.
The pension regulator’s PFM list for the private sector NPS presently include HDFC Pension Management, ICICI Prudential Pension Fund Management, Kotak Mahindra Pension Fund, LIC Pension Fund, Reliance Capital Pension Fund, SBI Pension Fund, UTI Retirement Solutions and Birla Sunlife Pension Management.Three of them - SBI Pension, LIC Pension Fund and UTI Retirement Solutions – also provide fund management services to the government sector NPS. The NPS has emerged as one of the main pillars managing retirement savings of citizens.