Banks Cleared to Sponsor Pension Funds Under NPS to Boost Competition: PFRDA

India’s pension regulator has allowed banks to independently sponsor and manage pension funds under the National Pension System (NPS), in a move aimed at enhancing competition and deepening participation in the sector. The Pension Fund Regulatory and Development Authority (PFRDA), which oversees assets exceeding $177 billion, said it has granted in-principle approval for eligible banks to set up pension fund entities, subject to norms consistent with Reserve Bank of India guidelines.

Under the new framework, banks will need to meet criteria linked to net worth, market capitalisation, and financial soundness before they can operate as pension fund sponsors. Until now, banks have primarily functioned as points of presence in the NPS ecosystem, facilitating subscriber enrolments, contributions, and related services, while a handful of existing pension funds operate with backing from financial institutions. Currently, 10 pension funds are registered with the PFRDA.

The decision forms part of a broader set of regulatory reforms introduced over the past year. In December, the PFRDA expanded investment options for NPS subscribers to include gold and silver exchange-traded funds, the Nifty 50 index, and Alternative Investment Funds, while also revising the Investment Management Fee structure effective April 1, 2026. The regulator further announced appointments to the NPS Trust Board, including former State Bank of India chairman Dinesh Kumar Khara as one of three newly inducted trustees.

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