Mumbai: More banks are expected to enter the pension fund management space as the Pension Fund Regulatory and Development Authority (PFRDA) looks to widen participation and deepen the investment universe for retirement savings.
PFRDA chairman Sivasubramanian Ramann said while two banks have shown interest, others are in the process. When regulations were first framed around 2012-13, asset management experience was largely limited to mutual funds and insurers, he said.
Banks, however, manage substantial treasury portfolios and possess adequate investment expertise, he added. “The application window remains open until March 31,” he said.
Two banks have already shown interest. Bank of Baroda and ICICI Bank’s applications have come, Axis Bank‘s is a work-in-progress, and a consortium led by Union Bank and Daiichi is also exploring participation, he said.
PFRDA is examining ways to deepen the pension fund’s participation in long-term infrastructure and project finance, while remaining within prudent risk parameters.
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Ramann said it is possible for long-term money to get into certain project financing stages, where an entity like a bank is assessing the risk and then inviting other people to join. “These are the kinds of discussions that we need to have to be able to understand how to improve the asset classes, the distribution of money between them, and introducing new asset classes,” he said.
On investments, pension funds will be permitted to invest in gold and silver through ETFs. These will fall under the alternatives category, which is capped at 5% of the equity allocation. Within this bucket, exposure to gold and silver is likely to be initially restricted to around 1%, subject to periodic review.The pension regulator is working on creating simpler payout products that give subscribers greater flexibility at retirement, including options beyond traditional annuities.
A committee has already begun work on designing one or two standardised products that would allow subscribers to choose between annuity payouts or structured withdrawals. The regulator is also exploring products with varied payout tenures, which would not necessarily be 25 years but potentially 10, 15 or 18 years.