Pension Sector Current Affairs - 2020

PFRDA suggests comprehensive Scheme to the Finance Ministry

On May 17, 2020, the Pension Fund and Regulatory Authority (PFRDA) of India suggested comprehensive scheme to the Ministry of Finance. Under the scheme, the social security measures for the people with low income are to be explored.

Highlights

The PFRDA has suggested comprehensive pension scheme to take along Pradhan Mantri Jeevan Jyoti Bima Yojana, Atal Pension Yojana.

What is the plan?

Under Jeevan Jyoti Bima Yojana, Rs 330 is being charged on yearly basis and Rs 12 per year is being charged under Suraksha Bima Yojana. The charges on Atal Pension Yojana is also quite low. The plan is to club all these schemes together.

Significance of integration

The integration increases the stability of the pension system. Also, the integration increases the growth rate of the pension schemes. This will also increase the number of entities participating in the scheme. This in turn improves social security of the workers. And also, the integration during COVID-19 period will support liquidity flow in the country.

Atal Pension Yojana

The APY had completed 5 years in May 2020 with more than 2.23 crore subscribers.

Credit Enhancement Fund: Government to launch Rs.500 crore fund

Union Government is going to launch Rs.500 crore Credit Enhancement Fund (CEF) in July 2018 to facilitate infrastructure investments by insurance and pension funds.

The CEF provides additional source of assaurance or gaurantee that borrower will service their loan. It also helps borrower to raise loans at lower interest rates. The  fund was first announced in Union Budget for fiscal year 2016-17.

Credit Enhancement Fund (CEF)

CEF will provide credit enhancement for infrastructure projects which will help in upgrading credit ratings of bonds issued by infrastructure companies and facilitate investment from investors like pension and insurance funds.

The initial corpus of the fund will be Rs 500 crore and will be sponsored by IIFCL (India Infrastructure Finance Company). It will operate as a non-banking finance company (NBFC). IIFCL will hold 22.5% stake in the NBFC, while Asian Infrastructure Investment Bank (AIIB) has been offered by the Government to pick up 10% stake.

Background

At present, only $110 billion is being invested in infrastructure in India, against requirement of $200 billion, leading many analysts to classify India as infrastructure deficit country. Most of the present infrastructure project financing is done by banking system. But all these lenders are saddled with problem of non-performing assets (NPAs). So there is need for the private sector to be more active on the infrastructure investment front. CEF will serve as alternative for rising of money for infrastructure projects through corporate bonds.