In a significant reform, pension regulator PFRDA has now allowed Pension Funds (pension fund managers) to keep securities as margin with the Clearing Corporation of India Limited (CCIL) for the purpose of margin requirements for investments in Government Securities (G-Secs) and Treasury Bills Repurchase (TREPS).
This move is expected to help bolster the returns of NPS subscribers as hitherto the NPS Trust regulations prohibited any encumbrance/pledging of assets by pension fund managers and only cash was allowed for fulfilling CCIL’s margin requirements, sources said.
PFRDA has now amended the NPS Trust regulations for this purpose. Also, specific guidelines have been issued on this front.
On an average atleast ₹ 50,000 to ₹ 60,000 crore of incremental NPS inflows every year gets invested into government Securities as part of the default choice under NPS government schemes, sources added.
“When Pension Funds invest in G-secs, they have to keep certain margin with CCIL. That margin can be either in form of cash or securities. Earlier, under PFRDA regulations, only cash margin was allowed. Now, instead of depositing cash, pension fund managers can deposit G-Secs held by them as margin for the same value”, sources said.
Earlier CCIL used to pay interest on all monies deposited towards margin with them. However, since August 2021, CCIL said that only the amount utilised towards margin would be paid interest.
Since PFRDA regulations did not allow any pledging of securities, this regulation had to be amended to allow the use of securities towards margin instead of cash.
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“The use of securities as margin is now being allowed as a special approval from the PFRDA. Now cash will be available for other purposes and to that extent will benefit NPS subscribers”, sources said.
e-NPS Platform
In another significant decision, the PFRDA has now made it clear that e-NPS platform will be the responsibility of the NPS Trust. The NPS Trust regulation has been amended so as to specify that NPS Trust would be required to manage and monitor the operations of e-NPS portal.
As of March end this year, nearly 7.5 lakh subscribers had come through e-NPS, which was initially rolled out in 2015, but soon faced legal issues on KYC front and finally resolved after apex court intervention.
“All the activities pertaining to registration of e-NPS would be managed and monitored by NPS Trust. Before this, there was no clear cut demarcation. Now the responsibility has been given to NPS Trust”, sources said.
While managing and monitoring of e-NPS web portal would be with NPS Trust, PFRDA would continue to have supervisory functions. The record keeping part of e-NPS would remain with the Central Record Keeping Agencies (CRAs).