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The finance ministry has
decided to allow pension funds to invest abroad and create overseas
At present, no provident funds,
including the labour ministry-managed Employees Provident Fund, gratuity
or superannuation funds, are allowed to invest in overseas markets.
According to finance ministry
sources, pension assets could include investment in the overseas market to
help the funds diversify their portfolio. This would also help them to
reduce volatility in returns, they said.
The sources, however, said the
finance ministry had not yet taken a final view on the ceiling for
overseas investment by pension funds. There could be separate limits for
overseas debt and equity investments, they added.
The move will take the rupee a
step closer to capital account convertibility. Finance Minister Jaswant
Singh on January 10 announced a series
of measures, including doubling the foreign investment ceiling for
mutual funds to $1 billion.
He had, simultaneously, allowed
individuals and corporates to invest in foreign companies that had at
least 10 per cent holding in a listed Indian company.
The finance ministry sources
said the government would soon set up a Pension Fund Regulatory and
Development Authority, which would issue licences to pension funds and
frame the rules of the business.
They said the regulator would
float global bids to attract international pension fund majors to set shop
It has already been decided
that the PFRDA will issue licences to six pension funds to operate in
While five will be selected on
a global basis, one licence will be set aside for a public sector fund, to
be called Pension Fund Corporation of India, which is likely to be floated
through equity contributions by banks and financial institutions.
The pension move