PFRDA has approved major reforms to NPS. Banks will be allowed to launch pension funds and investment management fees will be revised. This could benefit subscribers with more options, better governance, and lower costs. Learn more.
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The Pension Fund Regulatory and Development Authority (PFRDA) has approved several policy reforms to further strengthen the National Pension System. These reforms aim to expand pension fund options, introduce competition into the system, and better protect the interests of investors (subscribers).
Banks Approved to Launch Pension Funds
The PFRDA has, in principle, permitted scheduled commercial banks to independently establish pension funds and manage deposits under the NPS. This proposal aims to remove old regulatory restrictions that had previously limited banks’ ability to play a significant role in the pension fund segment.
Which banks will be eligible?
The regulator has clarified that not every bank will be granted this permission. Only those banks with strong financial positions and considered systemically reliable will be able to sponsor pension funds.
Eligibility will be assessed based on the bank’s net worth, market capitalization, and financial strength as per RBI regulations. Detailed criteria will be notified later, and will apply to both new and existing pension funds.
New Trustees on the NPS Trust Board
To strengthen governance, the PFRDA has appointed three new trustees to the NPS Trust Board after a selection process. These include Dinesh Kumar Khara, former Chairman of SBI, Swati Anil Kulkarni, former Executive Vice President of UTI Asset Management Company, and Arvind Gupta, co-founder of the Digital India Foundation. Dinesh Kumar Khara has also been appointed Chairperson of the NPS Trust Board.
Changes in Investment Management Fees
The PFRDA has also revised the investment management fee (IMF) structure for pension funds. This new structure will be effective from April 1, 2026. It establishes different fee rates for government and non-government sector subscribers to better protect investor interests.
This revised fee structure will also apply to schemes under the Multiple Scheme Framework, where the corpus for each scheme will be calculated separately. However, the regulator has clarified that there is no change in the annual regulatory fee of 0.015 percent paid by pension funds.
What is the purpose of these reforms?
According to the PFRDA, these decisions are aimed at making the NPS ecosystem more competitive, better governed, and sustainable in the long term. This will also provide a more secure retirement future for subscribers from the government, corporate, retail, and emerging workforces.
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