Regulator allows banks to sponsor NPS pension funds

MUMBAI: Soon, banks will be able to independently sponsor funds for managing National Pension System (NPS) assets, as PFRDA on Thursday approved in principle a framework that seeks to remove regulatory constraints that had thus far limited banks' participation in the pension fund management business.

"PFRDA board has approved, in principle, a framework to permit banks 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," said PFRDA in a statement.

Banks willing to sponsor these funds will have to meet a 'clearly defined' eligibility criteria based on net worth, market capitalisation and prudential soundness, aligned with RBI norms.

"(It will) ensure that only well-capitalised and systemically robust banks are permitted to sponsor pension funds. Detailed guidelines will be notified separately and will apply to both new and existing pension funds," the statement said.

Currently, banks only serve as points of presence, handling subscriber registrations, contributions and other system services. At present, there are 10 registered pension funds with the PFRDA.

Besides, PFRDA also appointed three new trustees to the board of the NPS Trust following a formal selection process. The new trustees include former SBI chairman Dinesh Kumar Khara, who has also been designated as the chairperson of the NPS Trust Board. The other two trustees are UTI AMC executive VP Swati Anil Kulkarni, and Dr Arvind Gupta, co-founder and head of the Digital India Foundation.

Additionally, the regulator also revised the Investment Management Fee (IMF) structure for pension funds starting April 1, 2026 and introduced differentiated rates for govt and non-govt sector subscribers. The IMF for govt sector employees under the Composite Scheme, Auto Choice and Active Choice G-100 options will remain unchanged. For non-govt sector subscribers, IMF will range from 0.12% for assets under management (AUM) up to Rs 25,000 crore, tapering to 0.04% for AUM above Rs 1.5 trillion.