Pension reform: PFRDA allows banks to set up pension funds for NPS; aims to boost competition

Core Insights - The Pension Fund Regulatory and Development Authority (PFRDA) has approved a framework allowing Scheduled Commercial Banks (SCBs) to independently establish pension funds to manage the National Pension System (NPS), aimed at enhancing competition and safeguarding subscriber interests [4][6] - The PFRDA is addressing regulatory constraints that previously limited bank participation by introducing eligibility criteria based on net worth, market capitalization, and prudential soundness, ensuring only well-capitalized banks can sponsor pension funds [4][6] - The Investment Management Fee (IMF) structure for pension funds will be revised effective April 1, 2026, to align with evolving realities and international benchmarks, introducing differentiated rates for government and non-government sector subscribers [5][6] - The National Pension System currently has over 90 million subscribers and assets under management of ₹15.5 trillion as of August 31 [5][6] Regulatory Changes - The PFRDA's new framework aims to strengthen the pension ecosystem and enhance competition among pension fund managers [4][6] - The revised IMF structure will apply to both new and existing pension funds, with the Annual Regulatory Fee (ARF) remaining unchanged at 0.015% [5][6] - The reforms are expected to lead to improved long-term retirement outcomes and enhanced old-age income security for subscribers [5][6] Governance Updates - PFRDA has appointed three new trustees to the NPS Trust Board, including Dinesh Kumar Khara as chairperson, who is the former chairman of State Bank of India [5][6]