The finance ministry has proposed to allow foreign direct investment (FDI) in pension sector up to 49%. A specific provision would be inserted in the Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011 for this purpose, according to media reports.
The PFRDA Bill will now need Cabinet approval before coming up in Parliament. The Bill seeks to open the pension sector to private sector and foreign investment. The Bill provides for establishment of a statutory authority to undertake promotional, developmental and regulatory functions in respect to pension funds. Interim PFRDA is functioning since 2003 through an executive order. PFRDA—set up as a regulatory body for pension sector—is yet to get statutory powers as the Bill pertaining to that effect lapsed in Parliament with the expiry of last Lok Sabha in 2009.
The PFRDA Bill, 2011 was introduced in the Lok Sabha by Pranab Mukherjee, Minister for Finance on March 24, 2011. The Bill was referred to the Standing Committee on Finance (Chairperson Yashwant Sinha) on April 8, 2011. The Committee submitted its report on August 30, 2011.
Earlier, the Government was planning to introduce foreign investment policy in the pension sector under FEMA (Foreign Exchange Management Act). There is no provision in the PFRDA Bill on FDI.
The Government had told the Parliamentary Panel that spelling out the foreign investment policy in the pension sector under FEMA was in line with most of the recent laws in the financial sector. However, the Standing Committee did not favour this approach for the pension sector, reports added.