Modi government is considering 100% FDI in pension sector
What's the story
The Indian government is considering a major change in the foreign direct investment (FDI) policy for the pension sector. The FDI limit could be raised to as much as 100%, sources told PTI. A bill to this effect is likely to be introduced in the next parliamentary session. The move is similar to a recent change in the insurance sector, where 100% FDI is now allowed.
Past amendments
Similar change made in insurance sector last year
Last year, Parliament passed a bill amending the Insurance Act, 1938, to raise the FDI limit in the insurance sector from 74% to 100%. The earlier amendment was made in 2015 when the FDI cap was raised from 49% to 74%. Now, a similar change is being considered for the Pension Fund Regulatory and Development Authority (PFRDA) Act of 2013.
Future plans
Proposed amendment bill may also separate NPS Trust from PFRDA
The proposed amendment bill could also include the separation of the National Pension System (NPS) Trust from the PFRDA. The powers, functions, and duties of this trust are currently defined under PFRDA (National Pension System Trust) Regulations 2015. They could be transferred to a charitable trust or regulated by Companies Act. This is intended to keep NPS Trust independent from pension regulator and managed by a competent board with majority government representation.
Pension reform
NPS was introduced to replace DBPS
The NPS was introduced by the Indian government as a replacement for the defined benefit pension system. It became mandatory for all new central government recruits from January 1, 2004 (except armed forces in first stage). The scheme has also been made voluntary for all citizens since May 1, 2009. This shift was made due to an unsustainable rise in pension bills and aims at freeing up government resources for more productive socio-economic sectoral development.