New pension Bill may allow 26% FDI,overseas investment by funds

The Ministry will also study recommendations of the earlier Parliamentary Standing Committee on Finance to which the Bill was referred immediately after being introduced in March 2004. The Committee had submitted its report in July 2005.

Officials said that with the Left parties not being a hindrance anymore,the government will also consider permitting pension funds deploy part of their corpus abroad in approved instruments besides allowing FDI. “This has to be carefully thought through in the backdrop of the global financial crisis,” an official said,adding that too many restrictions in the financial sector would mean drawing wrong lessons from the global crisis.

Originally,the Finance Ministry had stayed away from including FDI-related provisions in the PFRDA Bill that was introduced in March 2004. The idea was to lend the government flexibility in increasing the FDI limit at appropriate junctures without having to approach Parliament for an amendment in the legislation. But the Standing Committee on Finance said any decision on FDI and deployment of funds abroad must be stipulated in the Bill itself.

Officials said the FDI limit in pension funds and their overseas investment norms would be similar to that allowed in the insurance sector. “So,if the amendment to the Insurance Act allows insurance companies to bring up to 49 per cent foreign investment,pension funds will also benefit to that extent.”

At present,the PFRDA,which so far does not have statutory backing,has allowed six private players in the pension funds business in India that was recently thrown open to private citizens. These are IDFC Mutual Fund,Kotak Mahindra,SBI,UTI Asset Management,ICICI Prudential Life Insurance and Reliance MF. ICICI Pru has plans to rope in Prudential of UK in its new pension fund company as well.