PFRDA allows fund managers to invest in Tier I bonds of banks

This will allow more flexibility and space for the pensions fund to explore new instrument in the best interest of subscribers, says chairman R V Verma

Pension fund regulator PFRDA today permitted fund managers to invest in Basel III compliant Tier I bonds of banks, a move that will help PF managers to diversify their investment.

"It is hereby clarified that additional Tier I bonds compatible under Basel III issued by scheduled commercial banks in accordance with the RBI guidelines are to be considered as debt instruments eligible for investments under the debt category of all NPS schemes provided they are rated as investment grade by at least one rating agency," PFRDA said in a notification.

Tier I bonds are instruments which are perpetual in nature and therefore are akin to shares.

"This will allow more flexibility and space for the pensions fund to explore new instrument in the best interest of subscribers," Pension Fund Regulatory and Development Authority (PFRDA) acting chairman R V Verma said.

This will also help in a better matching of funds tenure and its deployment in these instrument, he said, adding, at the macro level it will facilitate deployment of long term pension fund with long term assets.

"In terms of the applicable investment guidelines, pension funds shall undertake their own due diligence for assessment of risks associated with the securities before investing, in the best interest of the subscribers and adhere to the prudential exposure norms," it said.