IRDA Current Affairs
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The Union Finance Ministry has constituted a high-level committee to consolidate the regulation of pension products that is currently being done by three different watchdogs including insurance and stock market regulators.
The committee would have representatives from all financial sector regulators SEBI, IRDA, RBI and PFRDA. Its mandate will be to look into the issue of bringing these companies which are offering pension plans under different regulators under the purview of PFRDA.
- PFRDA: Pension Fund Regulatory and Development Authority.
- SEBI: Securities and Exchange Board of India.
- IRDA: Insurance Regulatory and Development Authority of India.
- RBI: Reserve Bank of India.
Why there is need to consolidate regulation of pension products?
The PFRDA Act says that PFRDA will be the pension regulator in the country. Currently, pension products floated by insurance companies and those sold by mutual funds are under purview of IRDA and SEBI respectively. Thus, there are cases of overlapping functions performed by financial sector regulators SEBI, IRDA, RBI and PFRDA in case of floating different pension products. For instance PFRDA is regulating all pension products in the country. However, insurers and mutual funds continue to sell pension products outside PFRDA’s watch. The PFRDA Act says that PFRDA will be the pension regulator in the country.
About Pension Fund Regulatory and Development Authority (PFRDA)
- PFRDA is a statuary pension regulatory authority established in 2003 under the PFRDA Act.
- It functions under the aegis of Union Ministry of Finance, Department of Financial Services.
- PFRDA promotes old age income security by establishing, developing and regulating pension funds.
- It also protects interests of subscribers to schemes of pension funds and related matters.
- It is responsible for appointment of various intermediate agencies such as Central Record Keeping Agency (CRA), Custodian, Pension Fund Managers, NPS Trustee Bank, etc.
The Union Cabinet approved the proposal of increasing the Foreign Direct Investment (FDI) limit in the insurance sector to 49% from the existing 26%. The move is in sync with the proposal made by Finance Minister Arun Jaitley in his maiden Budget speech to raise the FDI cap in insurance sector from 26% to 49%.
However, the management control of insurance firms will be with the Indian companies only. The step to enhanced FDI limit is expected to benefit private sector insurance companies, which require a huge amount of capital.