PFRDA allows banks to sponsor pension funds under NPS
Context
India’s pension regulator, Pension Fund Regulatory and Development Authority (PFRDA), has allowed banks to set up and run their own pension funds under the National Pension System (NPS).
What was the situation earlier?
Banks were only helpers in the NPS system.
They acted as Points of Presence (PoPs):
Opening NPS accounts
Collecting contributions
Providing customer services
They did not manage or invest the pension money.
What has changed now?
Banks can now directly manage pension money by creating their own pension fund companies.
Eligibility conditions:
Linked to net worth, market capitalisation, and prudential soundness.
Norms aligned with Reserve Bank of India (RBI) guidelines
These conditions are in line with rules of the Reserve Bank of India (RBI).
Rationale
To increase competition in the pension sector
To give people more choices for managing their retirement savings
To improve efficiency and performance of pension funds
At present, there are only 10 pension fund managers, so allowing banks can expand the system.
Other recent changes in NPS (important)
NPS subscribers are now allowed to invest in:
Gold and silver ETFs
Nifty 50 index
Alternative Investment Funds (AIFs)
Pension fund fees will change from 1 April 2026, which may affect returns.
New trustees have been added to the NPS Trust Board, including Dinesh Kumar Khara, former Chairman of State Bank of India.
Prelims practice MCQs
Q. With reference to the National Pension System (NPS), consider the following statements:
It is regulated by the Pension Fund Regulatory and Development Authority.
Banks were earlier allowed to manage and invest NPS funds directly.
NPS follows a market-linked, defined contribution structure.
Which of the statements given above are correct?
(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: (b)
Explanation:
Statement 1 is correct.
Statement 2 is incorrect; banks earlier acted only as Points of Presence.
Statement 3 is correct.
Q. At present, how many pension fund managers are registered with the PFRDA?
(a) 5
(b) 7
(c) 10
(d) 15
Answer: (c)