The new pension scheme, which opened for non-government employees in May, has received a poor response so far. About 650,000 people from the government and over 2,000 from the informal sector have joined the scheme. Its assets under management are to the order of Rs 3,000 crore (Rs 30 billion), of which only Rs 2.5 crore (Rs 25 million) has come from the informal sector.
The pension regulator, the Pension Fund Regulatory Development Authority, is taking various steps to boost the numbers, chairman tells Vrishti Beniwal in an exclusive interview. Excerpts:
Is response to the NPS on expected lines?
We knew subscriptions would not be very high initially because of the tax disadvantage the NPS has compared to public provident fund, employees provident fund and unit-linked insurance plans (Ulips), which are exempt from tax at all stages.
Another reason for the slow start is that we have a direct selling model in which an individual goes to the bank to open an account, unlike mutual funds and insurance
products where agents do the legwork for you.
Do you plan to explore other distribution channels such as agents?
We have not preferred that model as it increases the cost for the subscriber, who will have to pay these agents.
Besides, mis-selling takes place when an agent is ignorant about the product or tries to push a product providing a higher commission without realising a customer's needs. So, we will not tweak our selling model just because we want to sell in a hurry.
Has National Securities Depository got back to you with revised charges?
We had asked NSDL to work out a cheaper model with reduced functionalities for those who cannot afford to pay the annual charge of Rs 350. NSDL has given a proposal which is under consideration and we will take a view on it by the month-end.
Thereafter, we will make a fresh proposal to the government to consider bearing some of the costs.
When will you allow the department of post and other banks to sell NPS?
We have received a formal letter from the postal department expressing interest in becoming a point of sale. The criteria for allowing post offices to sell the NPS is
that they should be able to transfer funds and data electronically to our
record-keeper, NSDL, and to our trustee banks taking contributions.
Besides, five banks, including Bank of Baroda, Punjab National Bank and Standard Chartered Bank, have shown interest in becoming a point of presence. We will decide their cases along with the DoP's in four to five weeks.
How many centres can the DoP add to the existing PoP network?
The DoP has more than 10,000 branches that can do electronic transfers. But we do not know yet how many of those will offer the scheme. It takes a little time to set up infrastructure and train people.
What kind of incentives you want for PoPs?
At the moment, it is just fee-based income. It is a social security product and some incentive should be given to them for selling. We have made a proposal to the government that if PoPs get a particular number of subscribers, they should get some percentage of their assets under management.
When will banks start selling NPS online?
ICICI Bank is running a pilot project for this purpose. Other banks will follow suit. It will bring down the costs for PoPs and provide a lot of convenience and facility to subscribers.
Image: D Swarup
