PFRDA allows scheduled commercial banks to set up pension funds for managing NPS

NPS

• PFRDA permits Scheduled Commercial Banks to establish Pension Funds for NPS.
• Three new trustees appointed to NPS Trust Board, Khara named Chairperson
• Pension Fund investment management fees restructured, effective April 2026

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The Pension Fund Regulatory and Development Authority (PFRDA) has greenlit sweeping reforms designed to promote pension infrastructure and expand the reach of the National Pension System (NPS) in the country.

The reforms announced on Thursday target increased participation, enhanced governance standards, and stronger protections for subscribers as the country's financial sector continues its formalization drive.

Among the most notable changes is a proposal permitting Scheduled Commercial Banks (SCBs) to establish their own Pension Funds for NPS management.

The Ministry of Finance explained the rationale in a statement: "PFRDA's board has approved, in principle, a framework to permit Scheduled Commercial Banks (SCBs) to independently set up Pension Funds to manage NPS, with the objective of strengthening the pension ecosystem. This shall enhance competition and safeguard subscriber's interests. The proposed framework seeks to address existing regulatory constraints that had limited bank participation till now."

Previously, regulatory barriers had restricted banks from sponsoring pension funds. The approved framework removes these obstacles by establishing clear eligibility standards tied to net worth, market capitalisation, and prudential soundness that align with Reserve Bank of India (RBI) norms.

PFRDA indicated that detailed criteria will be released separately and will apply equally to both new and existing pension funds. The finance ministry projects that this initiative will boost competition, expand the pension market, and reinforce protections for NPS subscribers.

In a parallel development, PFRDA has named three new trustees to the NPS Trust Board through a formal selection procedure. The appointees are Dinesh Kumar Khara, former Chairman of the State Bank of India; Swati Anil Kulkarni, former Executive Vice President at UTI Asset Management Company; and Arvind Gupta, Co-founder and Head of the Digital India Foundation.

Khara will serve as Chairperson of the NPS Trust Board, bringing considerable banking and governance expertise to the position.

PFRDA has also restructured the Investment Management Fee for Pension Funds, with changes taking effect April 1, 2026. The updated slab-based system introduces distinct rates for government and non-government subscribers, offering reduced fees for higher assets under management in the non-government category.

Investment management fees for government sector employees under certain schemes remain unaltered. The Annual Regulatory Fee paid to PFRDA stays at 0.015 per cent of AUM, with a portion allocated to the Association of NPS Intermediaries for outreach and financial literacy programs.

According to PFRDA, these reforms will foster a more competitive, robust, and well-managed NPS structure, enhancing long-term retirement prospects and fortifying old-age income security for citizens across India.