The government has notified a hike in the ceiling on foreign direct investment (FDI) in the pension sector to 49 per cent from the existing 26 per cent, paving the way for more foreign funds to enter the national pension system. The increase is in line with the recent passage of the Insurance Laws (Amendment) Bill in Parliament, which allows a higher 49 per cent foreign investment limit in the insurance sector. The cap on foreign investment ncludes FDI, foreign portfolio investments (FPI) and investments from NRIs.
While FDI up to 26 per cent can be through the automatic route, investments above this limit need to be routed through the Foreign Investment Promotion Board (FIPB). The Pension Fund Regulatory and Development Authority (PFRDA) has fixed the level of FDI in the pension sector at 26 per cent or such percentage as approved for the insurance sector, whichever is higher.
Foreign investment in pension funds will be subject to the condition that the entities bringing in foreign equity need the necessary registration from the PFRDA and comply with other requirements as per the PFRDA Act.