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PFRDA Reforms: Banks Can Now Set Up NPS Pension Funds for Stronger Growth

The Pension Fund Regulatory and Development Authority (PFRDA) has approved a new framework allowing Scheduled Commercial Banks to independently establish and manage Pension Funds under the National Pension System (NPS). This move aims to strengthen competition and protect subscriber interests by introducing clear eligibility criteria based on net worth and prudential soundness. Additionally, PFRDA has appointed three new trustees to the NPS Trust Board and revised the Investment Management Fee structure, effective April 2026, to align with international benchmarks. These reforms are expected to create a more resilient NPS ecosystem, improving long-term retirement outcomes and old-age income security.

Key Points: PFRDA Reforms Allow Banks to Set Up NPS Pension Funds

  • Banks can sponsor NPS pension funds
  • New trustees appointed to NPS Trust
  • Revised investment fee structure from 2026
  • Aims for more competitive pension ecosystem
2 min read

PFRDA unveils policy reforms to promote sustainable growth of NPS

PFRDA approves framework for banks to sponsor NPS pension funds, appoints new trustees, and revises fee structure to boost competition and subscriber security.

"enhance competition and safeguard subscriber's interests - Ministry of Finance"

New Delhi, Jan 1

The Pension Fund Regulatory and Development Authority's board has approved a framework to permit Scheduled Commercial Banks to independently set up Pension Funds to manage NPS, with the objective of strengthening the pension ecosystem, it was announced on Thursday.

This will enhance competition and safeguard subscriber's interests.

The proposed framework seeks to address existing regulatory constraints that had limited bank participation till now, said Ministry of Finance in a statement.

By introducing a clearly defined eligibility criteria based on net worth, market capitalisation and prudential soundness in line with RBI norms, it will ensure that only well-capitalised and systemically robust banks are permitted to sponsor Pension Funds.

"The detailed criteria will be notified separately and will apply to both new and existing Pension Funds," the statement said.

PFRDA has appointed three new Trustees on the Board of NPS Trust, pursuant to the selection process initiated by PFRDA.

These are Dinesh Kumar Khara, Former Chairman, State Bank of India; Swati Anil Kulkarni, Former Executive Vice President, UTI AMC-Trustee; and Dr. Arvind Gupta, Co-Founder and Head, Digital India Foundation and Member of the National Venture Capital Investment Committee under the Fund of Funds Scheme managed by SIDBI.

Khara has also been designated as the Chairperson of the NPS Trust Board.

In order to align with evolving realities, aspirations of the public, international benchmarks and the objective of expanding coverage across corporate, retail and gig-economy segments, PFRDA has revised the Investment Management Fee (IMF) structure for Pension Funds to safeguard subscriber interests with effect from April 1, 2026.

The revised slab-based IMF introduces differentiated rates for government and non-government sector subscribers which shall also apply to schemes under the Multiple Scheme Framework (MSF), with MSF corpus being counted separately.

PFRDA expects these policy reforms to help the subscribers and stakeholders to access a more competitive, well-governed and resilient NPS ecosystem, leading to improved long-term retirement outcomes and enhanced old-age income security.

- IANS

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Reader Comments

P
Priyanka N
Finally addressing the regulatory constraints for banks. As someone who works in the gig economy, I'm glad they are thinking about expanding coverage to us. A structured pension plan is much needed for freelancers and contract workers.
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Aman W
The revised fee structure from 2026 is a good move to safeguard subscriber interests. But I hope the "clearly defined eligibility criteria" are enforced strictly. We don't want weak banks managing our retirement savings, only the robust ones.
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Sarah B
Interesting reforms. Aligning with international benchmarks is crucial. The board appointments look strong on paper – hope they bring the necessary governance to build trust in the NPS system for the long term.
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Karthik V
While the intent is good, implementation is key. Differentiated fees for government and non-government subscribers needs more clarity. Will this lead to better service for corporate/retail segments, or will it create a two-tier system?
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Meera T
More options are always welcome! If my own bank can manage my NPS, it might simplify things. Hope they make the process of switching or choosing a new Pension Fund manager very transparent and customer-friendly.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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