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Banks to Launch Pension Funds: PFRDA Reforms Boost NPS Competition & Security

The Pension Fund Regulatory and Development Authority has approved reforms allowing scheduled commercial banks to independently establish and manage pension funds under the National Pension System. This move aims to address previous regulatory constraints and enhance market competition while safeguarding subscriber interests. Additionally, PFRDA has appointed three new trustees to the NPS Trust Board and revised the investment management fee structure to align with international benchmarks. These comprehensive reforms are designed to create a more resilient pension ecosystem, improving long-term retirement security for Indian citizens.

Key Points: PFRDA Allows Banks to Set Up NPS Pension Funds

  • Banks allowed as pension fund sponsors
  • New NPS Trust trustees appointed
  • Revised investment fee structure
  • Enhanced governance and competition
3 min read

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

PFRDA reforms let scheduled commercial banks establish pension funds for NPS, aiming to boost competition, governance, and subscriber safeguards in India's pension system.

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

New Delhi, January 1

In a major policy move aimed at strengthening India's pension ecosystem, the Pension Fund Regulatory and Development Authority has approved a series of reforms to promote sustainable growth of the National Pension System.

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.

- ANI

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Reader Comments

P
Priya S
This is good news! I've been contributing to NPS for a few years now. More players in the market means we might get more innovative pension products and better fund management. I just hope the PFRDA keeps a very strict watch on the governance part. Our retirement savings are not to be gambled with.
R
Rohit P
Finally! Banks have the trust of the common man. If my own bank starts offering NPS management, I'd be more likely to increase my contribution. It simplifies everything - one app for banking, investments, and now pension. Hope they roll this out quickly.
S
Sarah B
While competition is good, I have a respectful criticism. The article mentions lower fees for higher AUM in the non-government segment. Doesn't this disproportionately benefit the wealthy? The small salaried employee with a modest corpus might not see the same benefit. The structure should be equitable.
K
Karthik V
The appointment of Dinesh Khara is a masterstroke. SBI's scale and his experience can bring much-needed heft to the NPS Trust. Strengthening old-age income security is crucial for a country with a young population like ours. We need to plan decades ahead. Bahut accha kadam hai.
M
Michael C
Interesting reforms. Aligning with international benchmarks is key. The revised fee structure effective from 2026 gives everyone time to adjust. Hope the focus on financial literacy through the intermediaries' association actually reaches the grassroots. Awareness is half the battle won.

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