INSUBCONTINENT EXCLUSIVE:
NPS: One proposal under consideration is to boost the limit for private sector employees to 75 per cent
India's $2.3 trillion equity market has surged in recent years, and is about to get a new endorsement - from the nation's pension regulator
"We are pressing the government to increase the equity proportion for government employees, and expect a favorable response very soon," from
the Finance Ministry, Hemant Contractor, chairman of the Pension Fund Regulatory and Development Authority, said in an interview
The PFRDA has called for a bump to 50 per cent, from 15 per cent - to match the maximum for private-sector pensions overseen by its National
Pension System arm.India's equity culture may also get a boost from a stewardship code to be rolled out for the country's fund managers to
push for corporate-governance best practices
The PFRDA, along with India's insurance and securities regulators, is pursuing the new code, Mr Contractor said in New Delhi Friday.Mr
Contractor, who's headed the pension regulator since 2014, said the new code will help improve the professionalism of business management,
with challenges ranging from the misuse of corporate funds to boards taking insufficient action when things go wrong.Government employees
contribute about 87 per cent of the Rs 2.3 lakh crore ($35 billion) overseen by the NPS, which started in 2004 and later opened to all
citizens for voluntary contributions
Aside from the NPS, the government operates the Employees' Provident Fund Organization, which offers investors defined returns on savings
Mr Contractor said his agency has pressed for legislation allowing workers to shift from that plan to the NPS.With interest rates trending
lower, "equities, if managed properly, should provide that extra bit" of return, Mr Contractor said
There's great appetite for putting money in stocks, and one proposal under consideration is to boost the limit for non-government
subscribers to 75 per cent, he said, adding that the strategy does carry risk.Pension funds from Japan to Australia have taken on greater
risk over time, conferring increased volatility
Norway's sovereign wealth fund said April 27 it lost $21 billion in the first quarter thanks to the global sell-off in equities
In India, appetite for risk may be less in a country where the 1.3 billion population doesn't have social security coverage, and where
savings have declined as a share of the economy from a peak a decade ago.But with risk comes the potential for outsized gains
After returning less than bonds in 2016 and a loss in 2015, India's NSE Nifty 50 Index of equities had a 31 per cent total return in rupee
terms in 2017, compared with the 3.1 per cent on Indian government bonds according to ICE Bank of America Merrill Lynch data.(Hemant
Contractor, chairman of the Pension Fund Regulatory and Development Authority, has headed the pension regulator since 2014.)Mr Contractor
saw less need to expand the cap on investment in corporate bonds, which is currently set at 40 percent of the portfolio
He said there's just not enough issuance in the market to make it more attractive
He also ruled out investing in overseas markets for some time to come, given the likelihood of better returns at home.The assets overseen by
the NPS are managed by the following: LIC Pension Fund Ltd
Kotak Mahindra Pension Fund Ltd
Reliance Capital Pension Fund Ltd
Birla Sunlife Pension Management Ltd
HDFC Pension Management Co
ICICI Prudential Pension Funds Management Co
UTI Retirement Solutions Ltd.
