Pension fund sponsors: PFRDA to open ‘on tap’ window next year, too

The pension regulator will next year open its ‘on tap’ licensing window for fund managers, PFRDA Chairman Supratim Bandyopadhyay has said. This will be the second year in succession when the window will be open.

PFRDA had opened an “on tap” window from July 1-31 for awarding licences to sponsors of pension funds. The ‘on tap’ system is similar to what the Reserve Bank of India has allowed for new banking entrants. Bandyopadhyay indicated that the “on-tap” window could be open early next fiscal. There were some who had come to PFRDA after the on-tap window closed this year. Now these players could join next year, he said.

“We had received two applications during July 1-31. Our board has approved those two — Tata Asset Management Company and Max Life Insurance. We have now written letter to both the sponsors. It may take another six months for them to set up their pension funds,” Bandyopadhyay said.

With the award of licences to Tata Asset Management and Max Life Insurance, the number of pension funds managers will rise to 10.

The PFRDA — based on a new Request for Proposal for appointment of pension fund managers — had in March awarded licences to eight sponsors of pension funds including Axis Asset Management. The other seven were the pension arms of SBI,UTI, LIC, ICICI, HDFC, Aditya Birla SunLife and Kotak. All these seven were fund managers of NPS in the earlier regime.

Besides throwing open the door to more pension fund managers, the RFP had introduced at least five-fold jump in their fees, making it lucrative to undertake this activity.

Meanwhile, Bandyopadhyay said he expects Axis Asset Management to launch its pension fund operations in the coming weeks. “I am told Axis Asset Management has already received SEBI approval. Now as it is owned by Axis Bank, the approval of RBI is awaited. It should come in next 15 days,” he said.

Insurers, MFs

The PFRDA Chairman also said that the authority is in talks with several insurers and mutual funds (with AUM of over ₹50,000 crore) to see if they could enter the pension fund management space. “We are telling them that if you are interested you can come and join us,” he said.

He made it clear that the recent stipulation of sponsor of pension funds necessarily having to manage AUM of atleast ₹50,000 crore should not be seen as relaxation of norms. “We have actually tightened it. Earlier, the regulation had said that ₹5,000 crore would be enough. Since we are now giving on tap window, we want to see only reputed players with good background should come. Pension funds are long term. For many of us this is the only support. Along with safety there are many other things. Only strong track record will allow us to give them the licence,” Bandyopadhyay added.

Working with fintechs

Bandyopadhyay also said that PFRDA was open to working with fintechs under a regulatory sandbox framework. Already several fintechs are now functioning as Point-of-Presence (PoP) under the NPS architecture.