The Hindu : FDI to be allowed in pension sector

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Thursday, Sep 04, 2003

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FDI to be allowed in pension sector

By Our Special Correspondent

NEW DELHI SEPT. 3. The Government has taken an in-principle decision to allow the Foreign Direct Investment (FDI) in the pension sector but no decision has yet been taken about the FDI limit to be permitted.

"The FDI limit in pension sector has not been decided but the Government has in-principle decided to encourage foreign funds in a big way,'' the Joint Secretary (capital markets), in the Union Finance Ministry, U.K. Sinha, told presspersons here today. The FDI limit would be set by the interim Pension Fund Regulatory and Development Authority, which would be put in place by the end of this year, he added.

The Government would have two models before it while deciding on the FDI limit for pension funds. It could either adopt the model for mutual funds where 100 per cent FDI was permitted or go by the limit for the insurance sector which was at 26 per cent of the equity. Mr. Sinha said many leading global pension funds had evinced interest in entering the Indian market but it was too early to name these companies. About the permission for pension funds to invest abroad, he said the regulator would work out the details.

The new contributory pension would be applicable to Government employees who joined after October 2002, and the new scheme would come into effect from the date of launching of the scheme, after which the General Provident Fund scheme would be scrapped for these beneficiaries, Mr. Sinha said. Responding to criticism that the new pension fund companies might not have the necessary infrastructure, Mr. Sinha said the aim was to have a Central Record Agency (CRA) which would provide the backup needed by these companies.

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