Pension reform: PFRDA allows banks to set up pension funds for NPS; aims to boost competition

The Pension Fund Regulatory and Development Authority (PFRDA) on Thursday permitted banks to independently set up pension funds to manage the government’s flagship National Pension System (NPS), a move aimed at enhancing competition and safeguarding subscriber interests, PTI reported.The PFRDA 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, enhancing competition and safeguarding subscriber interests,” the regulator said in a statement.Under the proposed framework, PFRDA said it seeks to address regulatory constraints that had so far limited bank participation, while introducing clearly defined eligibility criteria based on net worth, market capitalisation and prudential soundness, in line with RBI norms. This is intended to ensure that only well-capitalised and systemically robust banks are allowed to sponsor pension funds.“The detailed criteria will be notified separately and will apply to both new and existing Pension Funds,” the regulator said. At present, there are 10 pension funds registered with PFRDA.In a parallel reform, the regulator said it has revised the Investment Management Fee (IMF) structure for pension funds with effect from April 1, 2026, to align with evolving realities, subscriber aspirations and international benchmarks, while expanding coverage across corporate, retail and gig-economy segments.The revised slab-based IMF structure introduces differentiated rates for government and non-government sector subscribers and will also apply to schemes under the Multiple Scheme Framework (MSF), with the MSF corpus being counted separately. However, the Annual Regulatory Fee (ARF) of 0.015% payable by pension funds to PFRDA will remain unchanged.The regulator said it expects these policy reforms to provide subscribers and stakeholders access to a more competitive, well-governed and resilient NPS ecosystem, leading to improved long-term retirement outcomes and enhanced old-age income security.Separately, PFRDA announced the appointment of three new trustees to the board of the NPS Trust. These include Dinesh Kumar Khara, former chairman of State Bank of India, Swati Anil Kulkarni, former executive vice president of UTI AMC, and Arvind Gupta, co-founder and head of Digital India Foundation.Khara has also been designated as the chairperson of the NPS Trust Board. The National Pension System currently has over 9 crore subscribers and assets under management of Rs 15.5 lakh crore as of August 31.