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Wednesday, Nov 10, 2004

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Money & Banking - Pension Plans


Minimum capital for pension funds at Rs 50 cr likely

Sarbajeet K. Sen

New Delhi , Nov. 9

THE indicator needle swirled by the interim pension regulator to help determine the minimum capital requirement for pension fund managers (PFMs) is threatening to halt pointing at the Rs 50-crore slot.

Amidst divergent figures proposed by different reports on pension reforms, the interim Pension Fund Regulatory and Development Authority (PFRDA) in its internal discussions is considering setting Rs 50 crore as the floor limit, according to senior Finance Ministry officials.

The figure is being proposed somewhat as a middle-path between the minimum capital requirement applicable to asset management companies (AMCs) and the insurance companies. "The interim PFRDA in its discussion paper has proposed Rs 50 crore as the minimum paid-up capital requirement for PFMs. This would be in between the Rs 10-crore minimum capital proposed for mutual funds and Rs 100 crore for insurance companies," officials said.

The insurance companies and the mutual funds would be battling it out to fill the limited PFM slots that are expected to be up for grabs once the regulations are put in place.

Officials, however, said that the Rs 50-crore figure is only an indicative one and that a final decision on the capital requirements for the pension sector players would be taken by PFRDA after it becomes a statutory body. The Government would soon be moving a Bill to give the legal backing to transform the interim PFRDA into statutory regulator for the pension sector.

The three major reports on pension sector reforms - the Dave Committee report, the IRDA report and the report of the India Invest Economic Foundation (IIEF) - have proposed different capital norms for PFMs.

The Government and the interim PFRDA has itself initially toyed with the idea of setting the floor level at Rs 100 crore which they felt would provide adequate comfort to subscribers who place part of their savings with these PFMs. However, the insurance and the mutual fund companies feel that the new players should be allowed to start off with a lower capital base that can subsequently be jacked up as their business grows.

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