In a significant move to bolster India's pension landscape, the Pension Fund Regulatory and Development Authority (PFRDA) has given the green light for banks to independently establish and manage pension funds under the National Pension System (NPS). This decision, approved in principle on Thursday, aims to inject greater competition into the ecosystem and better protect the interests of millions of subscribers.
New Framework for Bank-Led Pension Funds
The PFRDA board has approved a new framework that will allow Scheduled Commercial Banks (SCBs) to sponsor their own pension funds. This initiative is designed to strengthen the pension ecosystem, enhance competition, and safeguard subscriber interests. Previously, regulatory constraints limited the direct participation of banks in this space.
Under the proposed rules, PFRDA will introduce clear eligibility criteria for banks, focusing on net worth, market capitalisation, and overall prudential soundness as per Reserve Bank of India (RBI) norms. This ensures that only well-capitalised and financially robust banks can enter the fray. The detailed criteria will be notified separately and will apply to both new and existing pension fund managers. Currently, there are 10 pension funds registered with the regulator.
Revised Investment Management Fee Structure
In a parallel reform, PFRDA has announced a revision to the Investment Management Fee (IMF) structure for pension funds, effective April 1, 2026. The change aims to align fees with evolving market realities, subscriber expectations, and international benchmarks while expanding coverage across corporate, retail, and gig-economy segments.
The new slab-based IMF structure will introduce differentiated rates for government and non-government sector subscribers. It will also apply to schemes under the Multiple Scheme Framework (MSF), with the MSF corpus being counted separately. However, the Annual Regulatory Fee (ARF) of 0.015% that pension funds pay to PFRDA will remain unchanged.
The regulator expects these combined reforms to foster a more competitive, well-governed, and resilient NPS ecosystem, ultimately leading to improved long-term retirement outcomes and enhanced old-age income security for subscribers.
New Trustees Appointed to NPS Trust Board
Separately, PFRDA announced the appointment of three new trustees to the board of the NPS Trust, which oversees the assets of the pension system. The new trustees are:
- Dinesh Kumar Khara, former Chairman of State Bank of India (designated as Chairperson of the NPS Trust Board).
- Swati Anil Kulkarni, former Executive Vice President of UTI AMC.
- Arvind Gupta, Co-founder and Head of Digital India Foundation.
These appointments bring extensive financial and digital expertise to the trust's governance. The National Pension System continues to see massive growth, with over 9 crore subscribers and Assets Under Management (AUM) of Rs 15.5 lakh crore as of August 31.
