The pension regulator has allowed investment up to five per cent of the corpus of government employees in the National Pension System (NPS) in asset-backed securities. This could kick-start real estate investment trusts and infrastructure investment trusts.
Tweaking the investment pattern for government employees on recommendations of the G N Bajpai committee, the Pension Fund Regulatory and Development Authority (PFRDA) has raised the investment limit on non-government securities to 45 per cent. It reduced exposure to government securities to 50 per cent.
The changed pattern will be effective from June 10. The cap on equity investment stays at 15 per cent. Changes in the investment pattern for private sector employees are awaited.
The government has tried to breathe life into real estate and infrastructure investment trusts ever since the Securities and Exchange Board of India (Sebi) issued guidelines for them a year ago. Experts believe PFRDA's move will bring these instruments to life.
The amended Finance Bill, 2015, provided partial relief to these funds from the minimum alternate tax, which is to be imposed when there is an actual transfer of units.
"Introduction of the new asset class is a welcome move," said Divya Baweja, partner, Deloitte Haskins & Sells.
"You need around Rs 500 crore for these products. No one has launched them, despite Sebi issuing guidelines a year ago. PFRDA's move will give them a start," said Hemal Mehta, senior director, Deloitte India.
Investment in these products can only be made in listed entities and only in securities with at least 'AA' ratings from Sebi-approved agencies.
The total assets under management of the NPS stood at Rs 83,917 crore on April 30, 2015. Of this, only about Rs 6,448 crore is from the private sector.
The Bajpai committee had also recommended a slew of changes for the NPS' private sector subscribers. It wanted an increase in the 50 per cent investment cap in equities and related investments. Besides, it had suggested exposure of up to 10-15 per cent of the investible amount in private equity, venture capital and alternate investment funds.
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