BackPension regulator wants NRIs to invest in NPS
The regulator will soon call a meeting of all banks which have NRI accounts to look for ways to attract the non-resident clientele
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New Delhi: The Pension Fund Regulatory and Development Authority of India (PFRDA) wants non-resident Indians (NRIs) to invest in the National Pension System (NPS).
The move comes at a time when it is looking to ease investment regulations to allow pension fund managers to invest in new products like exchange-traded funds (ETFs) focused on the government’s disinvestment programme and real estate investment trusts (REITs).
PFRDA chairman Hemant Contractor said the regulator will soon call a meeting of all banks—both state-run and private sector—which have NRI accounts to look for ways to attract the non-resident clientele.
“NRIs have been eligible to invest in the NPS from its inception. But because of concerns over ambiguity in regulations, they were not investing. But recently RBI (Reserve Bank of India) has issued a clarification that will pave the way for them to invest in NPS," he said.
“NPS should be an attractive option for NRIs, especially those in the Middle East, as most do not have permanent jobs or avenues of investment like buying property in the countries they live in," he added.
This, along with the government’s decision to allow an extra ₹ 50,000 deduction in income tax for investments made in NPS should help increase the subscriber base, according to PFRDA.
At present, there are 96 lakh NPS subscribers with the total assets under management at almost ₹ 88,000 crore. But a majority of the assets are under the mandatory government sector scheme.
Suresh Sadagopan, a Mumbai-based financial planner, said NPS will be useful for NRIs in the Middle East who plan to return to India rather than those who are in the US and Europe and have no plans of returning.
“Most of the NRIs in the Middle East are blue-collar workers and invest most of their money in building a house in India and are left with no savings for their old age. A scheme like NPS will ensure that the investor cannot withdraw his funds before a fixed number of years and hence manage to accumulate a decent corpus," he said.
Contractor said PFRDA has already relaxed investment regulations for the government sector scheme and is in the process of notifying investment regulations for the private sector. Pension fund managers in NPS can now invest the corpus subject to a ceiling in REITs, investment trusts and ETFs.
He added that PFRDA will soon take a call on implementing the recommendations of the G.N. Bajpai Committee on easing investment regulations. PFRDA is likely to implement the recommendations of the committee phase-wise, given the radical nature of some of the recommendations.
“We have set up two sub-committees to look into the recommendations. They are looking at issues like the valuation methodology to be followed, a product which will offer minimum assured returns and performance benchmarks for pension fund managers," he said.
PFRDA is also likely to make available an online account-opening facility to subscribers from August this year.
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