Revision of Investment Guidelines for NPS Schemes – PFRDA Circular: 1. Investment guidelines for Government Sector NPS Schemes (Applicable to Government Sector, Corporate CG and NPS Lite schemes of NPS), 2. Investment Guidelines for Private Sector NPS {applicable to E (Tier- I & II), C (Tier I & II), and G (Tier – I & II)}
CIRCULAR
PFRDA/2014/02/PFM/1
Date: 29-Jan-2014
Sub: Revision of Investment Guidelines for NPS Schemes
As a measure to optimise returns of the subscribers and with a view to ensure quality investments in the interest of subscribers, it has been decided to amend the investment
guidelines applicable to NPS schemes. These are as follows:
guidelines applicable to NPS schemes. These are as follows:
2. Investment guidelines for Government Sector NPS Schemes (Applicable to Government Sector, Corporate CG and NPS Lite schemes of NPS):
3. Investment Guidelines for Private Sector NPS {applicable to E (Tier- I & II), C
(Tier I & II), and G (Tier – I & II)}
| Asset Class |
Investment Guidelines |
| E | Index funds/ Exchange Traded Funds that replicate the portfolio of either BSE Sensex index or NSE Nifty 50 index. Index Fund Schemes invest in securities in the same weightage comprising of an index. The PF will have to choose which index they intend to track in advance on an yearly basis. |
| C | (i) Fixed Deposits of scheduled commercial banks with the following filters : (a) Net worth of at least Rs. 500 crores and a track record of profitability in the last three years (b) Capital adequacy ratio of not less than 9% in the last three years. Net NPA of under 5% as a percentage of net advances in the last year (c) List to be reviewed half yearly (ii) Credit rated debt securities with residual maturity of not less than three years from the date of investment, issued by Bodies Corporate including scheduled commercial banks and public financial institutions [as defined in Section 4A of the Companies Act] 1956, provided that the instrument has an investment grade rating from at least one rating agency. PFM has to do his own due diligence too (iii) Credit Rated Public Financial Institutions/PSU Bonds |
| G | (i) Government of India Bonds (ii) State Government Bonds |
| E/C/G | Pending deployment as per investment objective, the moneys under the respective Schemes may be invested in short-term deposits of Scheduled Commercial Banks as eligible under para (i) (a),(b) and (c) above or in call deposits or in short-term money market instruments or other liquid instruments or Liquid Funds of AMCs regulated by SEBI with the following filters: ⢠AMCs are SEBI regulated, with Average total assets under management (AUM) for the most recent six-month period of, at least, Rs.5000 crore. All assets that are permitted for investment into liquid funds by SEBI or both not exceeding a limit of 10% of scheme corpus on temporary basis only.
|
4. Following restrictions/filters are being imposed for both Government & Private Sector NPS
schemes to reduce concentration risks in the NPS investment of the subscribers:
schemes to reduce concentration risks in the NPS investment of the subscribers:
a) NPS investments have been restricted to 5% of the ‘paid up equity capital’* of all the sponsor group companies or 5% of the total AUM under Equity exposure whichever is lower, in each respective scheme and 10% in the paid up equity capital of all the non-sponsor group companies or 10% of the total AUM under Equity exposure whichever is lower, in each respective scheme.
*’Paid up share capital’: Paid up share capital means market value of paid up and subscribed equity capital.
b) NPS investments have been restricted to 5% of the ‘net-worth’# of all the sponsor group companies or 5% of the total AUM in debt securities (excluding Govt. securities) whichever is lower in each respective scheme and 10% of the net-worth of all the non-sponsor group companies or 10% of the total AUM in debt securities (excluding Govt. securities) whichever is lower, in each respective scheme.
#
Net Worth: Net worth would comprise of Paid-up capital plus Free Reserves including Share
Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets.
Net Worth: Net worth would comprise of Paid-up capital plus Free Reserves including Share
Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets.
c) Investment exposure to a single Industry has been restricted to 15% under all NPS Schemes by each Pension Fund Manager as per Level-5 of NIC classification. Investment in scheduled commercial bank FDs would be exempted from exposure to Banking Sector.
d) State Government Bonds restricted to 10% of the AUM of
Government Securities of each respective scheme and to 5% to any individual
state government of the AUM of Govt. schemes of respective scheme.
Government Securities of each respective scheme and to 5% to any individual
state government of the AUM of Govt. schemes of respective scheme.
e) In respect of NPS Scheme (Government pattern of
investment),and Schemes E and C (Tier I & II), the Industry Concentration limits
of 15% and Issuer Concentration limits for Sponsor / Non â sponsor group will
not apply in cases where the aforesaid schemes invest in or mirror the Equity
Index Funds/ETF and /or Debt Mutual Funds. However, if the PF makes investments
in Equity/Debt instruments, in addition to the investments in Index funds/ETF/Debt
MF, the exposure limits under such Index funds/ETF/Debt MF should be considered
for compliance of the prescribed the Industry Concentration , Sponsor/ Non
Sponsor group norms. ( For example, if on account of investment in Index Funds/
ETFs/Debt MFs , if any of the concentration limits are being breached than
further investment should not be made in the relative Industry /Company).
investment),and Schemes E and C (Tier I & II), the Industry Concentration limits
of 15% and Issuer Concentration limits for Sponsor / Non â sponsor group will
not apply in cases where the aforesaid schemes invest in or mirror the Equity
Index Funds/ETF and /or Debt Mutual Funds. However, if the PF makes investments
in Equity/Debt instruments, in addition to the investments in Index funds/ETF/Debt
MF, the exposure limits under such Index funds/ETF/Debt MF should be considered
for compliance of the prescribed the Industry Concentration , Sponsor/ Non
Sponsor group norms. ( For example, if on account of investment in Index Funds/
ETFs/Debt MFs , if any of the concentration limits are being breached than
further investment should not be made in the relative Industry /Company).
f) PFs should invest in MFs/ETFs/Index Funds directly
(through in- house replication) such that the double incidence of cost is
avoided (No payment to be made to Asset Management Company).
(through in- house replication) such that the double incidence of cost is
avoided (No payment to be made to Asset Management Company).
g) The investment guidelines for both Government and Private
sector allow derivative instruments to be used only for the purpose of hedging
and portfolio rebalancing, in accordance with the guidelines issued by PFRDA/SEBI/RBI.
Credit Default Swaps (CDS) with the above provisos may be treated as eligible
derivative instruments.
sector allow derivative instruments to be used only for the purpose of hedging
and portfolio rebalancing, in accordance with the guidelines issued by PFRDA/SEBI/RBI.
Credit Default Swaps (CDS) with the above provisos may be treated as eligible
derivative instruments.
5. Pension Funds to ensure that the interest of the
subscribers is safeguarded and that they should not incur any loss while exiting
the existing investments to comply with the revised guidelines. However, all
future investments should be made strictly in compliance with the above
guidelines.
subscribers is safeguarded and that they should not incur any loss while exiting
the existing investments to comply with the revised guidelines. However, all
future investments should be made strictly in compliance with the above
guidelines.
6. The above guidelines shall take immediate effect and
portfolios under all NPS schemes are sought to be regularized as on 1st April
2014 in line with the revised guidelines.
portfolios under all NPS schemes are sought to be regularized as on 1st April
2014 in line with the revised guidelines.
7. These instructions supersede all earlier
circulars/clarifications related to investments issued in this regard by PFRDA ,
and for compliance , should be read in conjunction with Schedule-II of the
Investment Management Agreement.
circulars/clarifications related to investments issued in this regard by PFRDA ,
and for compliance , should be read in conjunction with Schedule-II of the
Investment Management Agreement.
Mamta Rohit
Chief General Manager
Chief General Manager
Source: PFRDA
[http://www.pfrda.org.in/writereaddata/linkimages/Circular%20on%20revised%20investment%20guidelines%20.pdf]
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