S Ramann, chairman of the Pension Fund Regulatory and Development Authority (PFRDA), said the move follows efforts to create a workable framework that allows pension assets to go to alternatives such as private equity and venture capital.
“We have now earmarked around 1% of AUM for investment in AIFs,” Raman said at an event in Mumbai. The National Pension System currently manages about 17 million crores and is expanding at about 10-11% annually, he said.
From October 2025, the pension watchdog will gradually expand both the investable categories and the quantitative limit to ensure the flow of local institutional entities for high-yielding assets. Current funds will be part of this expanding investment.
Previously, it allowed investment in equities, other listed assets such as exchange traded funds (ETF) and bullion-based commercial securities. Domestic institutional capital has long been seen as a missing piece in the alternative ecosystem, which has historically relied heavily on foreign investors.
To facilitate allocation, the regulator has created an investment framework through NPS Trust that will allow alternative fund managers to submit proposals and seek allocation from pension assets. The platform is currently undergoing testing before implementation.
The private equity and investment industry is seeking greater participation from large domestic institutions such as the Employees Provident Fund Organization and the Life Insurance Corporation, both of which manage large pools of long-term savings. Raman said establishing strong governance and transparency standards across the industry will be necessary to attract such investment. “The ecosystem must demonstrate the efficiency and transparency that is expected globally,” he said, urging fund managers to adhere to high governance standards to build trust among institutional investors.
This is necessary because the pension system is expanding rapidly, especially among private sector workers.
Shares of non-state customers grew by 24% to 28% year-on-year compared to the 8% to 11% growth seen in state pension assets.
“Historically, pensions in India have been largely government-owned,” Raman said. “That perception needs to change as more private sector workers start contributing to retirement savings.”
