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Govt Allows 26 PC FDI In Pension Funds

New Delhi, Nov 16: The government today approved amendments to the PFRDA (Pension Funds Regulatory And Devlopment Authority) Bill 2011 while agreeing to the proposed 26 per cent foreign investment in the pension sector but

PTI [ Updated: November 16, 2011 17:34 IST ]
govt allows 26 pc fdi in pension funds
govt allows 26 pc fdi in pension funds

New Delhi, Nov 16: The government today approved amendments to the PFRDA (Pension Funds Regulatory And Devlopment Authority) Bill 2011 while agreeing to the proposed 26 per cent foreign investment in the pension sector but refrained from providing assured returns to subscribers in the proposed law.


The government had decided not to mention FDI cap in the legislation itself for retaining the flexibility of changing it through an executive order. The 26 per cent FDI cap is to be mentioned in the regulations to the legislation.  The changes to the PFRDA Bill were approved by the Union Cabinet at its meeting here.

The Bill, which has already been scrutinised by the Parliamentary Standing Committee on Finance, is likely to be taken up for consideration and passage in the Winter Session beginning November 22.

“The government is of the view that FDI cap in the pension should be at 26 per cent at par with the insurance sector. However, it would like to retain the flexibility of changing the cap of FDI as and when required and that is why it has not been kept as part of the bill”, an official spokesperson said.

The proposed legislation, the official said, will not provide assured returns to the subscribers of pension schemes.  The Committee, which is headed by senior BJP leader and former Finance Minister Yashwant Sinha, wanted the government to specify the FDI cap in the legislation itself and provide minimum guaranteed return to subscribers. 

The government also turned down the Committee's recommendation for allowing greater flexibility to subscribers of pension schemes for pre-mature withdrawal of funds from their accounts.

“The flexibility of withdrawals from funds under the pension scheme, however, would be tightened. It would be allowed only in case of genuine needs...It would be considered when the need is critical. It will not be allowed for frivolous reasons,” the official explained. 

The government, however, upheld the panel's suggestion to provide greater participation of the employees and stakeholders in the Pension Advisory Committee, the official said.

The Bill, which was introduced in the Lok Sabha on March 2011, was referred to the Standing Committee for consideration.

The government, it may be mentioned, has not been able to raise FDI in insurance from 26 per cent to 49 per cent because the changes require amendments in law. The Insurance (Amendment) Bill has been pending since 2008. 

Once the FDI caps are mentioned in the regulations, it would be easier for the government to modify the ceilings, as and when needed, through an executive order.

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