In the Budget session of Parliament, the government introduced revised version of pension reforms Bill to give statutory powers to interim regulator, Pension Fund Regulatory and Development Authority (PFRDA). Interim chairman Yogesh Agarwal does not visualise any further hurdles in the passage of the Bill, but also says the proposed Act does not give it additional powers, except for imposing penalty. Agarwal tells Indivjal Dhasmana that he does not envisage turf war with other financial sector regulators like Sebi and Irda. Edited excerpts:
Do you see any further roadblock in the passage of the PFRDA Bill?
First of all, there will be no roadblock since at the introduction stage, they have gone in for a division of votes. (BJP bailed out government in division of votes at the time of introduction of the Bill). Even if it comes to voting, the Bill will sail through with both the Congress and the BJP behind it. The Bill will not even go to the standing committee, and even if it goes, it will remain a formality because the Bill was originally conceptualised when Yashwant Sinha was the finance minister and he is now chairman of the standing committee.
The government is contributing Rs 1,000 a year for every account in unorganised sector a year in Swavalamban scheme (regulated by PFRDA). What is the progress of the scheme?
Considering the scheme was launched only in September, we had 500,000 subscribers by the end of March 2011. The finance minister has already indicated he expects 2 million accounts by March 2012 which I think should be no problem.
Are 2 million accounts feasible?
If we can get 500,000 accounts in 6 months, it is only logical that we get 1.5 million accounts in a full year.
There are pension schemes by mutual funds, insurance companies. Who will regulate them?
At the moment, the system in India is that you do not regulate products, but entities. Obviously, pension products offered by insurance companies will continue to be regulated by IRDA. You have already seen a decline in the contribution of pension schemes offered by insurance companies. Because now, you have very scientifically designed product in New Pension System (NPS), regulated by interim PFRDA. Already there is a move among people to shift to NPS that is being seen as a much superior product. Financial analysts are writing that NPS is the best financial product available in the market. I see very significant movement from those products to NPS.
So, you don’t anticipate any turf war with other financial sector regulators?
No. because as I said, once benefits of NPS are available, specially taxation benefits that have been introduced in the Budget this time, I think it will be very clear to everyone that if you are going for pension products, this is the best product available in the market.
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(This year’s Budget has provided deduction to employer for their contribution to NPS, subject to a ceiling).
After the passage of the Bill, when the regulator is given statutory powers, do you envisage greater growth in the NPS?
Growth will take place, but not because of statutory powers. Statutory powers do not confer any extra powers except for the power to impose penalties. At the moment, pension sector is at a stage where it is growing. So, my role is more of a developer, instead of a regulator. At this stage of the pension sector, idea of imposing penalty does not arise. So far as development of pension sector is concerned, this bill does not give me any additional power.