In a move that could boost the fund-starved infrastructure sector, the government is examining the possibility of making it mandatory for a portion of pension or retirement monies accumulated under the pension regulatory body to be invested in infrastructure projects with AA ratings.
While the government proposed that pension and insurance companies, apart from provident funds, be allowed to trade directly in debt funds, the regulator — Pension Funds Regulatory and Development Authority (PFRDA) — has had reservations on this.
The infrastructure sector needs investments of over $1 trillion during the 12th Plan period (2012–17).
The regulator recently set up a committee to re-examine the investment guidelines for these bodies, and to carve out fresh norms that would enable pension money to flow into new and “lucrative” instruments — which could include infrastructure bonds floated by banks and infrastructure debt funds.
A committee under India Infrastructure Finance Company Ltd chairman Santosh B Nayar, which recently submitted a report to the finance ministry on financing the power sector, too recommended that PFRDA direct a part of the fund into the infrastructure sector.
“In view of the huge funding requirement of the infrastructure sector, it is essential to channelise long-term funds from insurance and pension funds into infrastructure ... PFRDA may advice the provident funds to invest at least some portion of their investments in AA rated papers of infrastructure SPVs,” the report, which the finance ministry is examining, said.
“The idea is to promote pension products... now this is retirement money, so we understand that it is critical to ensure that they are invested in safe and lucrative instruments and at the same time we need to understand how this has to be directed towards infrastructure as the sector needs a push,” a senior government official told HT
Pension fund managers are registered under the PFRDA, from SBI, UTI, LIC, Kotak Mahindra, Reliance Capital, ICICI Prudential, HDFC and DSP BlackRock among others.