One of the most crucial,yet long-pending financial sector reforms in the country the Pension Fund Regulatory and Development Authority Bill,2011,was passed by the Lok Sabha on Wednesday. PFRDA chairman Yogesh Agarwal believes that this will bring in more subscribers to the National Pension System as the regulator now has a statutory status. In an interview with The Indian Express,Agarwal said that subscribers would move from the EPFO to the NPS. Excerpts:
It has taken 10 years since the interim pension authority was notified,but the PFRDA has finally got statutory backing…
Yes,this is a historic step and India will finally be able to give its citizens old age income security. The Pension Fund Regulatory and Development Authority (PFRDA) will be converted to a statutory body and will have regulatory status such as powers to punish.
How will the 26 per cent foreign direct investment (FDI) impact operations of pension fund managers?
FDI was permitted even when the bill was not passed and some of the pension fund managers already have an element of FDI. For the sector,it has been a non-issue. Whether there is 26 per cent of 49 per cent FDI,it does not matter as the capital requirements are small because the sector is at a nascent stage.
Are you looking at any immediate changes with the enactment of the bill?
No,we are not considering any immediate steps. We are taking forward what has already been done.
Do you think statutory status to the PFRDA will attract more subscribers to the National Pension System?
Yes,of course. Statutory status to the regulator increases the confidence of pensioner in the set up as we have powers to regulate pension fund managers and the overall architecture. Anyone investing their life savings in a scheme gets comfort from such a measure.
What is the scope of the pension market in the country?
The NPS has an unlimited scope. As of now,88 per cent of the population has no access to pension. For us,the sky is the limit. We will definitely push marketing and distribution channels for the product to attract more members.
Does the passage of the bill bring you on an equal footing with the Employees Provident Fund Organisation (EPFO) ?
There is absolutely no competition from the EPFO as the NPS is the only genuine pension product in the country. All other products are just pretenders. The EPFO has a subsidised,non-transparent investment pattern. Other privately run superannuation schemes are also not as attractive and people have already begun to migrate to the NPS. We will see much more movement from the NPS to the EPFO now.