The union cabinet today approved 26 per cent foreign direct investment (FDI) in the pension sector, and cleared amendments to the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011.
As reported by The Indian Express on Wednesday, the government has decided not to mention the FDI cap in the PFRDA bill. It will find mention in the regulations to the legislation.
The bill was introduced in the Lok Sabha in March, and was referred to the parliamentary standing committee on finance chaired by senior BJP leader and former finance minister Yashwant Sinha. The committee recommended the insertion in the law the 26 per cent FDI clause and the assured return clause in the New Pension Scheme.
The committee had sought a reply from the finance ministry on why the foreign investment ceiling for the pension sector was not prescribed in the bill, and left the decision on FDI to the executive.
The government is of the view that foreign investment in the pension sector may be capped at 26 per cent on par with that in the insurance sector under the general regulations framed under the Foreign Exchange Management Act (FEMA), 1999. No express provision has been made in the PFRDA Bill, 2011.
“This is in line with most legislations in the financial sector”, the Department of Financial Services had said in its written reply.
Yashwant Sinha told The Indian Express today that the BJP “will have to sit down and take a view” (on supporting the bill). “BJP’s support cannot be taken for granted.”
The bill is likely to be introduced in Parliament’s winter session. The BJP had rescued the government during its introduction, after the Left sought a division.
Sinha said he was “surprised” that the government had not accepted the “very important recommendations” of the standing committee. “We had arrived at these conclusions after a great deal of deliberations and after a great deal of consensus-building,” he said.
Sinha said the panel had wanted the “power of changing or increasing the (FDI) limit to be with Parliament rather than with the executive”.
“If it is in the regulations, the government can change it and then report to Parliament,” he pointed out.
The New Pension Scheme (NPS) was launched as a voluntary scheme for all citizens in May 2009. It is regulated by interim regulator PFRDA, and managed by seven pension fund management companies — LIC, SBI, IDFC, Kotak Mahindra, Reliance Capital, UTI Retirement Solutions and ICICI Bank. It has a corpus of over Rs 9,925 crore and a subscriber base of 24 lakh, mostly government employees.
“In India, pension fund industry is yet to grow. The sector has tremendous growth opportunities. FDI would prove to be a milestone in its growth,” said Balram Bhagat, CEO, UTI Retirement Solutions.
Source : http://www.indianexpress.com, November 16, 2011