overseas investment_ - pfrda bill likely in next session
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8/7/2019 OVERSEAS INVESTMENT_ - PFRDA Bill likely in next session
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OVERSEAS INVESTMENT? - PFRDA Bill likely in next sessionB Y S ANJIV S HANKARAN [email protected] NEW DELHI
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Legislation to create a statutory pension regulator and allow up to 49% foreign investment in pension fund
management companies is likely to be introduced in the forthcoming budget session of Parliament.
The government plans to in- troduce a pension Bill in the coming Parliament session, a senior finance ministry
official said on condition of anonymi- ty. The pension Bill will largely follow the suggestions of a par- liamentary
standing commit- tee given in 2005, the official added.
The United Progressive Alli- ance government, in its first term (2004-09), had intro- duced a Pension Fund
Regula- to ry and Development Author- ity (PFRDA) Bill in July 2005.
The Bill did not specify a cap on foreign investment in pen- sion fund managers.
The PFRDA Bill was later ex- amined by a parliamentary standing committee, which said foreign direct investment
in the sector and investment of pension funds abroad should in no way be at variance with that applicable to the
insur- ance sector.
At present, the standing committee o f Parliament is ex- amining an insurance Bill, which seeks to enhance for-eign investment in companies to 49% from the current cap of 26%. In an ideal world, this (PFRDA Bill) should be
a legis- lation that creates an enabling environment, said Gautam Bhardwaj, director of Invest India Economic
Foundation, a consultancy specializing in pension reforms.
According to Bhardwaj, an umbrella legislation such as the proposed PFRDA Bill should not specify caps on op-
erational aspects such as for- eign investment in companies.
These caps could be specified in subordinate legislation to give governments more flexi- bility to tailor them to
the pre- vailing environment, he said.
The government plans to sound the oppos ition on the possibility of putting the PFR- DA Bill to vote w ithout
sending it to a parliamentary standing committee on finance for an- other round of scrutiny, the fi- nance ministry
official cited above said.
The outcome of the govern- ment's plan to avoid sending the PFRDA Bill to the standing committee w ill be knownearly next month as representatives o f government and the opposi- tion are to meet to find a way to ensure the
smooth function- ing of Parliament.
Currently, the pension sec- tor has its own regulator, PFR- DA, which started a market for pension products in
2008.
Unlike the other financial services regulators such as the Reserve Bank of India, PFRDA does not have statutory
status.
Consequently, PFRDA does not have the quasi-judicial powers of other regulators.
The drawback of not having statutory powers is that if one of the entities PFRDA regulates violates norms, it
cannot im- pose punishment. PFRDA would have to use the judicial system to punish a violation by an entity it
regulates.
The standing committee, which examined the 2005 PFR- DA Bill, had made a few other recommendations that
may be incorporated in the new legis- lation.
The committee had recom- mended the PFRDA Bill em- power the watchdog body to appoint an administrator to
run a regulated entity when events left it with no other choice.
The regulator should also be entrusted w ith responsibility for protecting the funds of in- vestors and have a say
in fund managers' operating costs to get the best deal for subscrib- ers, the committee recom- mended.
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