The Parliament sanctioned a Bill to raise the Foreign Direct Investment (FDI) limit from 49% to 74% for the March insurance sector. In 2015, the Insurance Act, 1938 was revised; the FDI limit was increased to 49%, resulting in a foreign capital inflow worth Rs 26,000 crore for the last five years. As of today, for the pension fund, the FDI limit is capped at 49%.
The government intends to increase now the FDI limit concerning the pension sector to 74%. As per the industry experts, a Bill regarding the same is anticipated to be announced in the upcoming Parliament session. There is also anticipation that the amendment Bill might include the separation of the National Pension System (NPS) Trust from the Pension Fund Regulatory and Development Authority (PFRDA).
PFRDA was formed to promote and ensure the pension sector’s periodic growth over the central recordkeeping agency, pension funds, and other intermediaries with adequate powers. Also, it aims at safeguarding the interest of members.
Currently, NPS Trust’s powers, functions and duties come under the PFRDA (National Pension System Trust) Regulations 2015. It might soon come under either a charitable trust or the Companies Act.
The objective is to keep the NPS Trust a different entity altogether from the pension regulator and manage a competent board comprising 15 members. Out of these 15 members, most of the members will probably be from the government since they are significant contributors to the corpus.
The Government of India introduced the NPS to replace the defined benefit pension system. NPS was made mandatory for all new central government recruits with effect from January 1, 2004 (apart from the armed forces in the first stage). Also, NPS was rolled out to all citizens with effect from May 1, 2009 voluntarily.
An amendment to the PFRDA Act, 2013, seeking an increase in the FDI limit concerning the pension sector, might come either in the winter or the monsoon session based on several approvals.
For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in
Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.
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