PFRDA will give perpetual licences to fund managers: Supratim Bandyopadhyay

Licences for perpetuity means these would not be revoked unless a fund manager itself wants to exit or it violates some terms. The fund managers will only need to pay fee for renewing licences

Supratim Bandyopadhyay, chairman, pfrda — Supratim Bandyopadhyay, chairman, PFRDA

2 min read Last Updated : Mar 09 2020 | 3:08 AM IST

The Pension Fund Regulatory and Development Authority (PFRDA) will issue request for proposals (RFPs) in the next two months and select fund managers for perpetuity against the current practice of issuing these licences for five years.

Supratim Bandyopadhyay, newly appointed chairman of PFRDA, said the authority expected that the existing seven fund managers and some others would apply for these RFPs.

Licences for perpetuity means these would not be revoked unless a fund manager itself wants to exit or it violates some terms. The fund managers will only need to pay fee for renewing licences.

Earlier, PFRDA had put a cap on the number of fund managers at 10. It is now having a re-look whether to increase it or not. Bandyopadhyay clarified that the licences were given for perpetuity but these would not be issued on tap. “On tap means you give some eligibility conditions and anyone filling those conditions can apply and get the licences without we issuing the RFPs.” As to why PFRDA is not going for on-tap licences, he said the authority also decides fund management charges in the RFP process. “We cannot do that if we issue on-tap licences,” he said. The regulator is also planning to increase this charge moderately from the existing 1 basis point.

“Currently, fund management charges are pittance. It is just 1 basis point, which means for every Rs 100 you give, only one paisa is charged. We feel that there is a scope to increase it a little bit to professionalise pension funds,” Bandyopadhyay said. It has yet not decided the exact fund management charges. “We will find the ideal charge,” he said. On whether PFRDA will decide to issue licenses on tap later, he said,"Let us see what is the response we get on our RFPs."

Currently, there are seven pension fund managers — HDFC Pension Management, ICICI Prudential Pension Fund Management, Kotak Mahindra Pension Fund, LIC Pension Fund, SBI Pension Funds, UTI Retirement Solutions, and Aditya Birla Sun Life Pension Management.