The Pension Fund Regulatory and Development Authority (PFRDA) has approved a new framework allowing Scheduled Commercial Banks (SCBs) to independently set up pension funds for managing the National Pension System (NPS), a move aimed at strengthening India’s pension ecosystem. The move is expected to enhance competition, deepen institutional participation and better safeguard subscriber interests, the pension regulator said.
From Distributors to Managers
The proposed framework seeks to ease regulatory constraints that have so far limited banks’ participation in pension fund management. It introduces clearly defined eligibility criteria based on net worth, market capitalisation and overall prudential soundness, aligned with norms prescribed by the Reserve Bank of India (RBI). This is intended to ensure that only well-capitalised and systemically robust banks are permitted to sponsor pension funds.
Until now, banks were allowed to act primarily as Points of Presence (PoPs) for NPS distribution, while only select bank-sponsored entities were permitted to function as pension fund managers under strict ring-fencing norms. Currently, there are 10 pension funds operating under the NPS, with assets under management of about Rs 16 lakh crore as of November 30, 2025.
Governance Reset
In a related development, PFRDA has appointed three new trustees to the board of the NPS Trust following a selection process initiated by the regulator. The new trustees are Dinesh Kumar Khara, former chairman of the State Bank of India; Swati Anil Kulkarni, former executive vice president at UTI AMC; and Arvind Gupta, co-founder and head of the Digital India Foundation and a member of the National Venture Capital Investment Committee under SIDBI’s Fund of Funds scheme. Khara has also been designated chairperson of the NPS Trust board.
To align the NPS framework with evolving market realities and international benchmarks, PFRDA has also revised the Investment Management Fee (IMF) structure, effective April 1. The new slab-based IMF introduces differentiated rates for government and non-government subscribers, while fees for government sector employees under composite and select auto-choice schemes remain unchanged.
For the non-government sector, the investment management fee has been set at 0.12% for assets under management up to Rs 25,000 crore; 0.08% for assets above Rs 25,000 crore and up to Rs 50,000 crore; 0.06% for assets above Rs 50,000 crore and up to Rs 1.5 lakh crore; and 0.04% for assets exceeding Rs 1.5 lakh crore. The annual regulatory fee payable to PFRDA has been retained at 0.015% of assets under management.
PFRDA said these reforms are expected to support wider coverage across corporate, retail and gig-economy segments, fostering a more competitive, well-governed and resilient NPS ecosystem and improving long-term retirement outcomes for subscribers.
