Government Plans Major FDI Hike in Pension Sector to 100%
According to sources, the government is considering a significant increase in the foreign direct investment (FDI) limit for the pension sector, potentially raising it to up to 100%. A Bill to facilitate this change is anticipated to be introduced in the upcoming Parliament session, marking a pivotal move to align the pension sector with the insurance industry, where up to 100% FDI is already permitted.
Aligning with Insurance Sector Reforms
This proposed hike follows recent legislative actions in the insurance sector. Last year, Parliament approved a Bill to increase the FDI limit in insurance from 74% to 100%. Prior to this, amendments to the Insurance Act, 1938, were made in 2015, which raised the FDI ceiling from 49% to 74%. The move to boost FDI in pensions aims to create consistency and attract more international investment into India's financial services.
Timeline and Regulatory Changes
Sources indicate that the amendment to the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, which seeks to raise the FDI limit, could be presented in either the Monsoon Session or the Winter Session of Parliament, depending on various approvals. Currently, FDI in pension funds is capped at 49%, and this change would represent a substantial liberalization of the sector.
Additional Reforms in the Amendment Bill
Beyond the FDI hike, the amendment Bill may include provisions for the separation of the NPS Trust from the PFRDA. The powers, functions, and duties of the NPS Trust are currently governed under the PFRDA (National Pension System Trust) Regulations 2015. This separation could enhance governance and operational efficiency within the pension framework, supporting broader economic reforms.
