Search the Internet          Tips  Sites: Finance, Investment

Government favours allowing private players in pension sector

In a bid to increase pension coverage in the country, the government said on Tuesday that it is in favour of allowing unlimited number of private players, including mutual funds and banks, to enter the pension sector once regulations are put in place hopefully by this fiscal.

"Life insurance companies can come up with annuity schemes. Other players, which can be considered will be banks and mutual funds," Ajit Sharan, joint secretary (insurance) in the finance ministry, told reporters after a FICCI seminar on Tuesday.

The main hurdle that may come in the way of entry of banks and mutual funds is the regulatory aspect. Banks and mutual funds are governed by the Reserve Bank and Securities and Exchange Board of India respectively, while pension would be regulated by the Insurance Regulatory and Development Authority.

Echoing on the same lines, IRDA chairman, N Rangachary, said the regulator was not in favour of putting any cap on the number of private players entering the sector.

"I feel, whenever you put a cap on number, it impedes growth," he said, adding IRDA does not want the process of "licence raj" to be repeated in insurance and pension sector.

Currently, only Life Insurance Corporation and Unit Trust of India have annuity schemes while other private players have also evinced interest in entering pension sector.

On whether UTI may be allowed to come up with more pension schemes, Sharan said the fund may be treated on a "slightly different footing".

Sharan, who is working closely with IRDA for preparing the roadmap for pension reform, said, "the regulations will be ready hopefully by this fiscal. The regulations pertains to investment, capital requirement, solvency and reporting."

Tell us what you think of this report