Scheduled commercial banks allowed to set up pension funds for managing NPS

New Delhi [India], January 1 : In a major policy move aimed at strengthening India's pension ecosystem, the Pension Fund Regulatory and Development Authority (PFRDA) has approved a series of reforms to promote sustainable growth of the National Pension System (NPS).

The reforms, announced on Thursday, focus on widening participation, improving governance, and safeguarding subscriber interests amid the expanding formalisation of the financial sector

A key highlight of the reform package is the proposal to allow Scheduled Commercial Banks (SCBs) to independently set up Pension Funds for managing NPS.

"PFRDA 's board has approved, in principle, a framework to permit Scheduled Commercial Banks (SCBs) 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. The proposed framework seeks to address existing regulatory constraints that had limited bank participation till now," Ministry of Finance said in a statement.

Until now, regulatory constraints had limited the participation of banks in pension fund sponsorship.

The newly approved framework seeks to address these constraints by introducing clearly defined eligibility criteria based on net worth, market capitalisation, and prudential soundness in alignment with Reserve Bank of India norms.

According to PFRDA, the detailed criteria will be notified separately and will apply uniformly to both new and existing pension funds.

The finance ministry said the move is expected to enhance competition, deepen the pension market, and strengthen safeguards for NPS subscribers.

In another significant development, PFRDA has appointed three new trustees to the Board of the NPS Trust following a formal selection process.

The newly appointed trustees are Dinesh Kumar Khara, former Chairman of the State Bank of India; Swati Anil Kulkarni, former Executive Vice President at UTI Asset Management Company; and Arvind Gupta, Co-founder and Head of the Digital India Foundation.

Khara has also been designated as the Chairperson of the NPS Trust Board, bringing extensive banking and governance experience to the role.

To align the NPS with evolving market realities and international benchmarks, PFRDA has also revised the Investment Management Fee (IMF) structure for Pension Funds, effective April 1, 2026.

The revised slab-based IMF introduces differentiated rates for government and non-government subscribers, with lower fees for higher assets under management (AUM) in the non-government segment.

The IMF for government sector employees under certain schemes will remain unchanged. Meanwhile, the Annual Regulatory Fee payable to PFRDA has been retained at 0.015 per cent of AUM, with a portion earmarked for the Association of NPS Intermediaries to support outreach and financial literacy initiatives.

PFRDA said the reforms are expected to create a more competitive, resilient, and well-governed NPS framework, ultimately improving long-term retirement outcomes and strengthening old-age income security for Indian citizens.

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