Banks may soon sponsor pension funds as PFRDA approves major NPS reforms

The Pension Fund Regulatory and Development Authority (PFRDA) has in principle approved a new framework aimed at strengthening the pension ecosystem, allowing Scheduled Commercial Banks (SCBs) to independently sponsor funds for managing National Pension System (NPS) assets.

 

The proposed framework seeks to remove regulatory constraints that had so far limited banks’ participation in pension fund management, while ensuring adequate safeguards for subscribers, according to a statement issued by PFRDA.

 

Eligibility criteria based on net worth, market capitalisation and prudential soundness, aligned with Reserve Bank of India norms, will be prescribed to ensure that only well-capitalised and systemically robust banks are permitted to sponsor pension funds. Detailed guidelines will be notified separately and will apply to both new and existing pension funds.

 

As part of measures to strengthen governance, PFRDA has also appointed three new trustees to the board of the NPS Trust following a formal selection process. The new trustees include former State Bank of India chairman Dinesh Kumar Khara, who has been designated as the chairperson of the NPS Trust Board.

 

The other two include former UTI AMC executive vice-president Swati Anil Kulkarni, and Dr. 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, the statement added.

 

“These reforms strengthen the institutional backbone of retirement security at a time when India’s workforce is becoming more mobile and non-traditional. Allowing banks to sponsor pension funds can expand NPS access across corporate, MSME and emerging gig segments through existing employer and payroll networks. The revised fee structure and enhanced outreach support are critical for building trust, coverage and continuity in pension participation—key gaps in India’s long-term workforce welfare framework,” said Rahul Singh, associate professor, O P Jindal Global University.

 

In another significant decision, PFRDA has also revised the Investment Management Fee (IMF) structure for pension funds to align with evolving market realities, international benchmarks and the objective of expanding NPS coverage across corporate, retail and gig-economy segments. The revised slab-based IMF structure will come into effect from April 1, 2026, and introduces differentiated rates for government and non-government sector subscribers. The IMF for government sector employees under the Composite Scheme, Auto Choice and Active Choice G-100 options will remain unchanged.

 

For non-government sector subscribers, the IMF will range from 0.12 per cent for assets under management (AUM) up to Rs 25,000 crore, tapering to 0.04 per cent for AUM above Rs 1.5 trillion.

 

The revised structure will also apply to schemes under the Multiple Scheme Framework, with the corpus under MSF being counted separately.

 

The Annual Regulatory Fee payable by pension funds to PFRDA will continue at 0.015 per cent of AUM. Of this, 0.0025 per cent will be allocated to the Association of NPS Intermediaries to support coordinated awareness, outreach and financial literacy initiatives under the regulator’s guidance.

 

PFRDA in its statement said that the reforms are expected to provide subscribers and stakeholders with access to a more competitive, well-governed and resilient NPS ecosystem, contributing to improved retirement outcomes and enhanced old-age income security.