PFRDA plans direct pension fund investment in big infrastructure projects

The Pension Fund Regulatory and Development Authority (PFRDA) is working on a plan to allow its regulated entities to invest directly in major infrastructure projects, according to PFRDA chairman S Raman during a NPS Diwas event. Currently, PFRDA entities invest through ReITS, InVITS, and alternate investment funds (AIFs). A committee has been formed to explore the possibility of direct investments in such projects, with internal discussions underway to establish a suitable mechanism.

Raman indicated that this would likely be a long-term, patient capital approach, potentially feasible within the next five years.

Internationally, Canadian pension funds already invest directly in significant infrastructure projects in India, including through equity ownership. PFRDA is examining various modalities to enable similar investments within the country. At the event, financial services secretary Sanjay Lohiya noted that as the domestic pension fund pool expands, there is optimism that these funds will provide substantial long-term investments, particularly in infrastructure.

While considering risk, reward, and investment quality, government and other stakeholders remain hopeful that pension funds will eventually offer patient capital.

Despite the introduction of the Unified Pension Scheme (UPS), which promises an inflation-indexed monthly pension equivalent to 50% of the average basic pay from the past 12 months, many employees covered under the National Pension System (NPS) have not opted for the scheme. Raman emphasized that PFRDA is intensifying efforts to extend NPS beyond government employees and the corporate sector, focusing on informal workers, self-employed individuals, and small business owners. The authority aims to add two to three crore subscribers to NPS within the next two years.