PFRDA in talks with Sebi to allow pension funds in commodity derivatives

PFRDA chairman S Ramann said discussions with Sebi are underway to allow pension funds to trade in select commodity derivatives, with metals likely to be prioritised

The Pension Fund Regulatory and Development Authority (PFRDA) is in discussions with the Securities and Exchange Board of India (Sebi) to allow pension funds to participate in select commodity derivatives, chairman S Ramann said on Friday.

 

Speaking on the sidelines of Assocham’s 8th Annual Conclave on the corporate bond market, Ramann said that pension funds have been seeking permission to trade in gold and silver derivatives, with other metals also under consideration. Agricultural commodities, however, may remain excluded, given their higher vulnerabilities.

 

“Sebi has been in touch with us. The idea is to identify a set of commodities we can begin with — could be metals as they are relatively easier to handle because of lower vulnerabilities. Pension funds want long-term stable returns. We have to be careful in the commodities market,” said Ramann. 

 

Any such move would require the PFRDA to issue new investment guidelines, subject to board approval.

 

The discussions follow similar signals from Sebi. Earlier this week, chairman Tuhin Kanta Pandey had said the regulator was engaging with the government to permit banks, insurers, and pension funds to access the commodities market. He added that a working group was being considered to develop trading in non-agri commodities such as metals, to help India shift from being a “price taker to a price setter.”

 

An executive with an insurance company said the insurance regulator may adopt a more cautious stance before allowing insurers to participate in this segment.