The Pension Fund Regulatory and Development Authority (PFRDA) has granted approval for scheduled commercial banks to set up independent pension funds to manage accounts under the National Pension System (NPS). The regulator said the move is intended to boost competition in the NPS market and better protect subscriber interests.
NPS pension fund India and what the changes mean
Under current rules banks are not permitted to promote pension funds. PFRDA’s decision removes that restriction in principle, allowing banks that satisfy specified financial criteria to establish pension funds. The permission will be subject to conditions modelled on benchmarks such as net worth and market capitalisation similar to Reserve Bank of India standards. Detailed eligibility norms will be announced separately and will apply to both existing and new pension fund managers.
Pension funds act as intermediaries that collect contributions and, in accordance with regulation, return value to subscribers. At present, ten pension fund managers are registered with the PFRDA. By allowing banks to enter the market, the regulator aims to increase choice for retail and gig-economy participants, expand corporate coverage and align the sector with international benchmarks.
In addition to permitting new entrants, PFRDA has restructured the investment management fee (IMF) framework to reflect changing circumstances and subscriber expectations. The revised structure introduces slab-based fees with separate rates for government and non-government subscribers and will operate within a multiple-scheme framework (MSF) where MSF pools will be accounted for separately. These fee changes will come into effect from 1 April 2026.
The regulator confirmed that the annual regulatory fee payable by pension funds to PFRDA, currently 0.015 per cent, will remain unchanged. PFRDA said the policy amendments should enhance operational efficiencies and improve long-term returns for subscribers by fostering greater competition among fund managers.
Separately, PFRDA has appointed three new trustees to the NPS trust board. The appointments include 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. Dinesh Khara will serve as chairperson of the NPS trust board.
The regulator noted that at the end of 31 August the NPS counted about 9 crore subscribers and had assets under management of approximately ₹15.5 lakh crore. The government has recently intensified efforts to widen NPS coverage across organised and unorganised sectors, encouraging maximum participation from diverse segments of the workforce.
Market participants said bank entry could bring established distribution networks and deeper retail reach to the pension fund industry. PFRDA expects these developments to raise service standards in the NPS ecosystem and ultimately to strengthen retirement income security for subscribers over the long term.
Key Takeaways:
- PFRDA has authorised scheduled commercial banks to establish pension funds to manage the National Pension System, widening competition and choice for subscribers.
- New investment management fee structure and slab-based rates will apply from 1 April 2026; annual regulatory fee (0.015%) remains unchanged.
- Approval will depend on banks meeting RBI-style criteria such as net worth and market capitalisation; 10 pension funds are currently registered.
- PFRDA also named three new trustees to the NPS trust as the scheme records about 9 crore subscribers and assets under management of roughly ₹15.5 lakh crore.
