Pension regulator PFRDA has taken a historic decision to make the National Pension System (NPS) more robust and transparent. Scheduled banks will now be able to independently establish their own pension funds, increasing market competition and giving customers greater expectations of better returns. These new rules, which will come into effect on April 1, 2026, not only change the investment management fee structure but also appoint three new key figures to the NPS Trust Board. In this article, we will explore in detail how this new role for banks and the revised fee structure will impact the old-age income security of over 90 million NPS members.
Banks Granted Pension Fund Authority
Until now, banks’ role in sponsoring pension funds under the NPS has been quite limited. However, according to a recent statement from PFRDA, the Board has granted in-principle approval to scheduled banks to establish independent pension funds. The primary objective of this significant change is to strengthen the pension ecosystem and protect customer interests.
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A pension fund is a vehicle that receives contributions from members, invests them securely, and ensures payments in accordance with regulations. Currently, only 10 pension funds are registered, but the inclusion of banks will increase this number, providing investors with more diverse investment options.
Eligibility Criteria
The PFRDA has clarified that not every bank will be able to open a pension fund. Strict eligibility criteria are being established, applicable to both new and existing funds. This requires a bank’s net assets exceeding a certain threshold. Additionally, the bank’s strong presence in the stock market, i.e., market cap, will also be a key factor.
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A bank’s financial stability and track record will determine whether it can safeguard customers’ funds. According to the PFRDA, only banks with systemically strong management will be granted this license. Detailed eligibility criteria will be released separately soon, ushering in a new era of pension management in the banking sector.
Changes to Investment Management Fees
The pension regulator has completely revised the investment management fee structure for pension funds. This new slab-based structure will be effective from April 1, 2026. A key feature of this new structure is that different rates will be set for government sector clients and non-government sector (corporate and retail) clients.
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Furthermore, this new fee structure will also apply to schemes under the Multi-Functional Scheme Framework (MSF). However, in a relief to clients, the PFRDA has clarified that the annual regulatory fee of 0.015% has not been significantly changed and will remain unchanged. This reform will provide clients with a more competitive and robust NPS environment, further strengthening their retirement funds.
Three new veterans join the NPS Trust Board
To further strengthen the governance of the NPS, three new trustees have been appointed to the board. The most prominent among these is former SBI Chairman Dinesh Kumar Khara, who has been appointed as the Chairman of the NPS Trust Board of Directors. Swati Anil Kulkarni, former Executive Vice President of UTI AMC, and Arvind Gupta, Head of the Digital India Foundation, have also been included on the board.
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The strong leadership of these seasoned veterans is expected to make the management of the NPS’s vast ₹15.5 lakh crore fund even more secure and efficient. Currently, the NPS has over 90 million members, whose future will now be further enhanced by these seasoned experts.