Union Bank of India is looking to launch a pension fund business this fiscal year, joining a growing list of lenders seeking to capitalize on regulatory changes that have opened up the National Pension System (NPS) to banks, according to two people aware of the development.
“We are working in a JV (joint venture) mode with Daiichi. But many approvals are yet to be taken. So far, the bank has not applied to PFRDA (Pension Fund Regulatory and Development Authority of India) for the pension fund, but they have plans to do that soon," said the first person mentioned above. "Currently, it looks like this should be launched in FY27, and the bank is working on that.”
Union Bank operates a joint venture with Dai-ichi Life International Holdings, a subsidiary of Daiichi Life Group, formerly known as Dai-ichi Life Holdings, a Japanese firm, for its insurance business Star Union Dai-ichi Life Insurance (SUD Life) since 2009. Bank of India is also a part of this JV.
Union Bank's foray plan comes after the pension fund regulator approved a framework allowing scheduled commercial banks to independently sponsor pension funds under the NPS in December 2025. The move aims to strengthen the pension ecosystem, boost competition and safeguard subscriber interests by bringing in well-capitalized institutions.
Earlier, banks had to partner with another entity with a minimum of ₹50,000 crore in assets to launch a pension fund. For instance, SBI Pension Fund is sponsored by State Bank of India and SBI Mutual Fund. Similarly, HDFC Pension Management Company is a wholly-owned subsidiary of HDFC Life Insurance Co.
A “strong backup” of Union Bank’s treasury team is expected to aid the pension plan foray, the person added. “We are expecting that many more banks will also be joining.”
The shift has already triggered interest across the banking sector. “Banks are looking at launching pension funds, as the PFRDA has finally given them permission to independently do so. Union Bank is looking to launch NPS, and so is Bank of Baroda,” said the second person aware of the plans.
Bloomberg had reported in December that Bank of Baroda is planning to launch a pension fund. Speaking at the Mint India Investment Summit 2026 last month, PFRDA chairperson Sivasubramanian Ramann said opening up independent pension fund sponsorship to banks could be a gamechanger for the segment.
Queries on the development emailed to Union Bank of India and Daiichi Life Group early Tuesday did not elicit a response until press time.
NPS assets still trail mutual fund assets under management (AUM), as the former is yet to gain traction. NPS AUM was at ₹16 trillion in FY26, with a dominant contribution from government employees, according to data from NPS Trust. Of this, ₹12.22 trillion came from central and state government subscribers, while corporate contributions accounted for ₹2.64 trillion, or about 17%.
The NPS subscriber base has crossed 21 million, reflecting steady growth but also highlighting headroom compared with other financial products.
By contrast, the mutual fund industry, which banks have actively tapped into through distribution and partnerships, has grown far larger, with ₹73 trillion in assets and nearly 274 million folios in FY26.
“As the financial market in India deepens and expands, the business of asset management is becoming increasingly important for financial institutions like banks as they have a large audience of both depositors as well as industries," said Sanjay Agarwal, director at Care Ratings. "So, they can use that franchise to build their business.”
Agarwal said pension funds offer a structurally attractive business model. “Pension is a very long-term business. Both assets and liabilities are long-term. So, as the increment happens every year, the whole business proposition increases substantially. This helps banks diversify into newer businesses and remain competitive,” he said.
Currently, India has 10 pension fund managers, of which four are backed by banks, including HDFC Pension Management Co, ICICI Prudential Pension Fund Management Co, Kotak Mahindra Pension Fund and SBI Pension Funds, according to the PFRDA.