Besides making available large amounts of funds for long-term investments and helping revive the economy, the proposals are also aimed at bringing down the Indian markets' over-reliance on foreign money.
According to senior officials, the proposals are being actively considered by the government and a final decision can be announced in the Union Budget next month.
It has been suggested that there is a need for uniform tax treatment of retirement related investments irrespective of the investment routes - pension products launched by mutual funds or the retirement funds managed by the government's EPFO (Employees' Provident Fund Office).
Sebi has also sought tax benefits for mutual funds launching pension products, while it has also been suggested that EPFO be allowed to invest part of their over Rs 5 lakh crore corpus into equities and equity-linked mutual funds. The regulator has also asked corporates to launch their own pension funds and invest a part of it in capital markets.
Indian markets typically relies heavily on foreign investors, who account for close to half of the free-float market capitalisation of Indian stocks.
Nearly half the FII money coming to Indian markets is from pension funds in different countries, but ironically, pension money from within the country is not allowed in stocks here.
Sebi is of the view that Indian markets' reliance could be shifted towards domestic investors if pension money is allowed to be invested, checking to a great extent the volatility induced by global developments.
With regard to surplus cash with PSUs, the current norms permit only Navratna and Miniratna Central Public Sector Enterprises (CPSEs) to invest in public sector mutual funds.
Sebi has recommended that the government should allow all CPSEs to choose from any registered mutual funds, including those in private sector, for investing their surplus cash.
There are more than 250 CPSEs in the country and collectively they are estimated to have total cash and bank balance of close to Rs 3 lakh crore. Under the existing provisions, CPSEs had invested close to Rs 16,000 crore in public sector mutual funds as on December 31, 2013.
The proposals would also bring in parity among different investment products on tax and other parameters.
There are about 45 fund houses present in the country with total assets worth over Rs 10 lakh crore, but fund mobilisation has been tough in the past couple of years and Sebi is of the view that their asset base has potential to rise to Rs 20 lakh crore within five years.