Discuss why Pension Fund Regulatory Development Authority (PFRDA) is crucial for India and examine the shortcomings in the regulatory framework. (200 words)
Refer – Business Line
Enrich the answers from other sources, if the question demands.
IAS Parliament 6 years
KEY POINTS
Significance of PFRDA
· In the past few decades, burgeoning populations and increasing life expectancies have led to an unprecedented rise in the elder population.
· India with the elder population, projected to reach 19% of the total population by 2050.
· A significant part of this group will be unable to work for a living, and also simultaneously incur higher medical and other expenses.
· Not only does the lack of a financial security net for this group leave it vulnerable to a number of exigencies, it also increases the likelihood of inter-generational continuity of debt and a higher fiscal burden for the government of the day.
· Given these factors, the presence of a sound, efficient and reliable pension system is indispensable to the economy.
· The Pension Fund Regulatory and Development Authority of India (PFRDA), set up in 2003, is responsible for establishing, developing and regulating pension funds in India.
· It regulates the functioning of key intermediaries under the NPS framework.
· It includes the NPS Trust and the Pension Funds and Points of Presence.
Shortcomings
· NPS – Being a regulator of the pensions sector, PFRDA is also responsible for promoting and developing the NPS. This gives rise to concerns of a potential conflict of interest.
· NPS Trust – At present, the NPS Trust and the PFRDA possess overlapping and concurrent powers.
· This lacks clarity, leading to accountability and conflict of interests concerns.
· Act – The foreign shareholding limits for Indian insurance companies are currently 49%.
· Also, the foreign exchange regulations, cap foreign shareholding in the pensions sector at 49%.
· But, PFRDA Act caps foreign shareholding in Indian pension funds to be the higher of 26 per cent of the pension fund’s paid-up capital or the limits specified for Indian insurance companies.
· The choice from dual percentages as specified in the Act creates unnecessary confusion.
· Consumer protection – The web-based grievance portal for NPS subscribers allows complaints registration only in English.
· Similarly the PFRDA (Redressal of Subscriber Grievance) Regulations, 2015 fails to specify clear grounds for approaching the office of the Ombudsman.
