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Last updated: 28 Apr, 2015  

pension.thumb.jpg FDI limit in pension sector hiked to 49 pc

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SME Times News Bureau | 28 Apr, 2015
The Indian government on Monday raised the limit of foreign direct investment (FDI) in the pension sector to 49 percent in line with the FDI cap raised recently in the insurance sector.

"In pursuance of the enactment of Insurance Regulatory & Development Authority Act, 2013, government has decided to permit FDI in the pension sector. The decision will take immediate effect," said the press note through which the department of industrial policy and promotion (DIPP) gives effect to new FDI policies or changes in existing ones.

The FDI ceiling in the sector has been hiked to 49 percent which includes foreign investment in the forms of FPI, FII, QFI, FVCI, NRI and DR.

No government approval is required till 26 percent, but the Foreign Investment Promotion Board (FIPB) approval would be needed for investment beyond 26 percent and up to the cap of 49 percent, the press note said.

All investments in the pension sector, however, will have to abide by the pension sector regulator the Pension Fund Regulatory and Development Authority (PFRDA).

Through an ordinance in December last year, the government had allowed 49 percent FDI. The ordinance was later converted into law by parliament.

Commenting on the move, experts said that there may not be a rush of new players into this sector in the short term.

"The move is expected to bring in more players. This in turn would grow the overall pension market benefiting all," S. Bandyopadhyay, MD and CEO of LIC Pension Fund Ltd, told IANS over phone on Monday.

However industry officials said the impact of the government move will not be immediate as it will take some time for the foreign players to come into this domain.

According to an industry official, the Indian pension sector is currently around Rs.80,000 crore and bulk of it is managed by three players -- LIC, SBI Pension Funds and UTI.

More than 90 percent of the business is from the government.

Including the private parties, there are seven players in the domestic pension sector licensed by PFRDA as the pension fund manager for the corpus under National Pension System (NPS).

The extra tax benefit for NPS subscription is expected to bring in additional business for the players, officials say.

Similarly allowing the employees to choose between Employees Provident Fund (EPF) and the NPS is expected to bring in more business for the pension players.

The FDI limit is in the forms of FPI, FII, QFI, FVCI, NRI and DR.

No government approval is required till 26 percent, but the Foreign Investment Promotion Board (FIPB) approval would be needed for investment beyond 26 percent and up to the cap of 49 percent.

All investments in the pension sector, however, will have to abide by the pension sector regulator, the Pension Fund Regulatory and Development Authority (PFRDA).
 
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