Mumbai: The pension regulator is all set to offer companies a threemonth moratorium on interest and principal payments on bonds and debentures held by pension funds in line with the banking and market regulators offering moratorium on loan and bond payments.

Pension fund managers will be asked not to treat delayed or skipped payments as defaults between the March and May period, said Supratim Bandopadhyay, chairman of Pension Fund Regulatory and Development Authority (PFRDA).

The announcement could come this week.

“We will be putting up the necessary guidelines in a day or two,” Bandopadhyay told ET. “If entities fail to meet their bond liabilities because of Covid-related issues, those will not be treated as default. We are writing to our registered pension fund managers and valuation agencies that these guidelines have to be followed.”

Pension funds, including the corpus under the Employees’ Provident Fund Organisation (EPFO), are estimated to have made investments of nearly ₹6-7 lakh crore in bonds and NCDs, which is about 20-23 per cent of total corporate bond outstanding. But the figure may vary depending on repayments, people aware of the status told ET.

The total size of corporate bond market is nearly ₹30 lakh crore, according to an estimate by a bond house that arrange issuances.

Pension funds can invest up to 40 per cent of their corpus into corporate bonds, rated ‘AA’ and above.

PFRDA, which handles about ₹4.17 lakh crore under the National Pension Scheme, has invested a little less than 30 per cent of the NPS corpus in bonds and non-convertible debentures of AAA-rated companies, especially state-run entities, market insiders said.

They welcomed the pension regulator’s move to offer moratorium. “Even though there is no mark-tomarket compulsion for pension funds, such moratorium will definitely allay investor apprehension,” said a senior investment banker involved in such bond sales.

Bandopadhyay said PFRDA considered the moratorium rules announced by the Reserve Bank of India (RBI) and markets regulator Sebi before formulating its rules.

RBI had on May 27 declared that banks can grant moratorium on payments falling between March 1 and May 31, as the economy grounded to a halt due to the lockdown to contain the spread of the novel coronavirus. The regulator left to banks’ discretion on which borrower to grant moratorium.

Sebi had also eased valuation policies for debt mutual funds to allow valuation agencies to take a call of not terming a paper as default if the delay in payment of interest or extension in maturity is because of covid-19-related lockdown.