Cabinet Okays 26% FDI In Pension Sector

17 November, 2011

The cabinet has approved foreign direct investment of up to 26 percent in the pension sector, a government source told Reuters on Wednesday, moving forward on a key reform initiative in the financial sector after years of dithering.

The decision, which needs parliament approval to become law, will give global players access to roughly $12 billion of assets that is expected to grow rapidly as more people join the workforce of Asia’s third largest economy.

“This is an enabling provision, and the government felt that there should be more exposure to the international market,” a senior government source, who declined to be named citing the sensitive nature of the decision, told Reuters.

The move to open up the pension sector to foreigners was opposed by the left parties after the Congress-led United Progressive Alliance first introduced a bill in parliament in 2005.

The left allies have since parted with the ruling coalition and the main opposition Bharatiya Janata Party supports pension reforms.

The government reintroduced the Pension Fund Regulatory and Development Authority bill in March this year, after which it was sent to a committee on finance. The panel submitted its report in August with some suggestions after which the government decided to fix the FDI cap at 26 percent.

The bill will now be considered by parliament in the winter session that starts next week, the source said.

Withdrawals from the fund will be made tougher, the source said.

Currently, pension funds of over a million employees in India are managed by domestic players such as IDFC, State Bank of India, Kotak Mahindra Bank, Reliance Capital and insurance major, Life Insurance Corporation of India.

Foreign firms have been lobbying to get into India’s growing and lucrative pension market. India’s insurance sector also currently has a 26 percent FDI cap.

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Cabinet Okays 26% FDI In Pension Sector

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