Budget 2020 expectations on National Pension System: Through a circular dated March 25, 2019, the Pension Fund and Regulatory Development Authority (PFRDA) had increased the limit on investments by NPS schemes in debt securities.
National Pension System investment rules: Ahead of Budget 2020, the PHD Chamber of Commerce has suggested the government to allow NPS schemes to invest in corporate bonds and securities with ‘BBB’ rating. “The PFRDA has recently allowed NPS schemes to invest in corporate bonds/securities which have a minimum of ‘A’ rating or equivalent. Going ahead, we suggest that these NPS schemes should be allowed to invest in corporate bond/ securities which have a rating of BBB,” PHD Chamber president DK Aggarwal said in a pre-budget meeting with Finance Minister Nirmala Sitharaman.
Through a circular dated March 25, 2019, the Pension Fund and Regulatory Development Authority (PFRDA) had increased the limit on investments by NPS schemes in debt securities. The regulator had said this move was aimed at providing flexibility to the schemes for better performance.
Last year (though circular dated may 8, 2018), the regulator had allowed the NPS schemes to invest in corporate bonds/securities with a minimum of ‘A’ rating or equivalent.
“As the development of corporate bond market will ultimately benefit the investment universe as a whole by improving the liquidity and confidence in the securities market and especially the bond market where a size of NPS contributions are invested, it has been decided by the Authority to allow pension funds to invest in corporate bonds/securities which have a minimum of ‘A’ rating or equivalent in the applicable rating scale subject to a cap on investments between A to AA- rated bonds to be not more than 10 % of the overall Corporate Bond portfolio (Scheme/Asset class C) of the pension fund referred in the subject investment guidelines,” PFRDA had said.
The regulator had allowed investment in A-rated bonds on the condition that the pension funds will submit a quarterly statement on the investments made in securities which have a minimum rating of ‘A and their performance including downgrades in this category to NPS Trust for monitoring of such investments.
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Aggarwal also suggested that investment in corporate bond/ securities which have a rating of BBB should be allowed to raise more money from pension funds, insurance companies, among others in the coming times.
Aggarwal also suggested the FM to create complementarities in the reforms such as readily availability of land for the industry, time-bound single-window clearances, full transmission of the policy repo rate, a dedicated fund for the MSMEs, tax reliefs for incremental exports, need for the review/ up-gradation of India’s FTAs.
He said that to stimulate domestic as well as foreign investments in the economy, it was essential to enhance the ease of doing business with an effective single window system. The most important reform needed in this regard was to ensure single-window clearances of all the government departments / all clearances at one stop in a time-bound manner.
To harness the export potential of the country, he suggested that sectors such as agro and food processing along with dairy products and seafood, automobiles and automotive components, defence including arms and ammunition, parts and accessories, electrical machinery and equipment, gems and jewellery, oil and gas, pharmaceuticals, sports goods, textile garments, handlooms and handicrafts and IT & ITeS must be facilitated in terms of procuring raw materials with concessions in duties, facilitation in production processes etc.