New Bill may allow 26% FDI, overseas investment by funds
June, 01st 2009
The Pension Fund Regulatory and Development Authority (PFRDA) Bill that will be re-introduced in Parliament proposes to let foreign players hold up to 26 per cent stake in Indian pension fund companies, similar to the quantum allowed in insurance companies. The PFRDA Bill that lapsed following the dissolution of the Fourteenth Lok Sabha on May 18 did not allow foreign direct investment (FDI) in pension funds.
According to Finance Ministry officials, discussions will soon start with the PFRDA to finalise the Bill. We hope to re-introduce the Bill in the Budget session of Parliament that begins in July first week, an official told The Indian Express.
The Ministry will also study recommendations of the earlier Parliamentary Standing Committee on Finance to which the Bill was referred immediately after being introduced in March 2004. The Committee had submitted its report in July 2005.
Officials said that with the Left parties not being a hindrance anymore, the government will also consider permitting pension funds deploy part of their corpus abroad in approved instruments besides allowing FDI. This has to be carefully thought through in the backdrop of the global financial crisis, an official said, adding that too many restrictions in the financial sector would mean drawing wrong lessons from the global crisis.
Originally, the Finance Ministry had stayed away from including FDI-related provisions in the PFRDA Bill that was introduced in March 2004. The idea was to lend the government flexibility in increasing the FDI limit at appropriate junctures without having to approach Parliament for an amendment in the legislation. But the Standing Committee on Finance said any decision on FDI and deployment of funds abroad must be stipulated in the Bill itself.