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Business News/ News / India/  ‘No plans to allow pension funds to invest in startups’
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‘No plans to allow pension funds to invest in startups’

The proposal is not off the table, but ascertaining the right valuation in the space is an issue, PFRDA chairman Supratim Bandyopadhay 

PFRDA chairman Supratim Bandyopadhyay.said large fintech players, including Paytm Money and ET Money, have also started distributing NPS.Premium
PFRDA chairman Supratim Bandyopadhyay.said large fintech players, including Paytm Money and ET Money, have also started distributing NPS.

Supratim Bandyopadhyay, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said that there were no immediate plans to allow pension funds, including the National Pension System, to invest in startups. The response comes amid news reports that the government may allow Life Insurance Corp. of India (LIC) and the Employees’ Provident Fund Organisation (EPFO) to invest in startups. 

Bandyopadhyay, however, said the proposal is not off the table but ascertaining the right valuation of a startup is difficult. 

“NPS pension funds declare a daily NAV (net asset value) unlike EPFO and LIC," he added. 

Last month, the regulator gave a conditional approval to pension funds to invest in initial public offerings (IPOs). Pension funds can invest in IPOs with share sales of at least 500 crore. The post-IPO market value of the company should also be among the top 200 most valuable companies in India.

The number of private sector subscribers in the NPS has crossed 3 million, Bandyopadhyay revealed. Large fintech players have also started distributing to NPS, including Paytm Money, Bandyopadhyay said. Zerodha is also exploring empanelment with the PFRDA as an NPS intermediary, he added. The number of private sector subscribers has also rebounded by almost 50% in FY22 from a year earlier. A total of 241,000 private sector subscribers joined NPS in FY22 till 12 August compared to 160,000 last year. 

NPS intermediaries called points of presence (PoPs) charge 0.25% per contribution to the NPS. The pension fund regulator recently allowed PoPs to empanel individual agents to distribute the NPS. However, no decision has been made on the remuneration, Bandyopadhyay said. NPS has delivered returns of 12.94% over the last 12 years for its equity schemes, 9.92% over its corporate bond schemes and 9.4% over its government bond schemes over the past 12 years, Bandyopadhyay added. 

The PFRDA also broadened the investment universe from stocks in the F&O segment with a market cap of 5,000 crore to the top 200 companies on BSE and NSE in order to allow pension funds to derive returns from a wider range of stocks. Subscribers also get a tax deduction of 1.5 lakh for investment in NPS Tier 1 under Section 80 C and 50,000 for investment in NPS Tier 2 under Section 80 CCD (1B).

neil.b@livemint.com

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ABOUT THE AUTHOR
Neil Borate
Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
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Published: 17 Aug 2021, 12:27 PM IST
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