Banks Allowed to Set Up Pension Funds under NPS Reforms

On 1 January, the Pension Fund Regulatory and Development Authority (PFRDA) announced major policy reforms to make the National Pension System (NPS) more competitive, transparent, and customer-centric. These reforms allow Scheduled Commercial Banks (SCBs) to independently establish pension funds and manage pension assets autonomously.

According to the Ministry of Finance, this move will increase competition in the pension sector, bring innovative approaches, and benefit customers with potentially better returns. The PFRDA Board has given in-principle approval to this framework, which removes existing regulatory barriers.

Under the new rules, only banks meeting eligibility criteria based on net worth, market capitalization, and RBI prudential norms will be allowed to become pension fund sponsors. This ensures that only financially strong and fundamentally secure banks can enter the sector. Additionally, new appointments have been made to the NPS Trust Board.