India Pension Funds Said to Request Easier Bond Investment Rules
(Bloomberg) – Indian pension managers asked the sector regulator to alleviate the rules that require the tenor of the company bonds they can purchase, according to people familiar with the issue.
Pension funds recently asked the retirement fund regulatory and development authority to relax a border for corporate bond purchases that mature in less than three years. He also said that they demanded permission to purchase the company debt, which was ranked by only one credit assessor.
The demands were made by the NPS intermediaries and the Industrial Organ Association at a new meeting. Managers underline the need for increasing flexibility as they aim to maximize the returns in a growing home saving pool. These assets have doubled in the last five years, which resulted in the economic growth of India and the participation of investors who increased to the financial system.
Currently, the investment in corporate bonds that mature in less than three years, according to the March 2025 circular by the retirement regulator, most securities need to be rated from at least two credit agencies.
Since the PANDEM, according to the data on the platform’s website, assets with national retirement system have tripled 14.4 trillion rupees ($ 168 billion). This has led to more government bond purchases and asked the Central Bank to introduce a category of the sector in 2023 following the dominant debt ownership.
However, the share of corporate bonds decreased to 23.7% per year on March 2024 and fell to 27.2% compared to the previous year.
The spokesperson of the Pension Fund Regulation and Development Authority did not respond to the request for comments.
The demand for relaxing the 10 % maturity norm will provide another investment opportunity for the growing industry. While the bonds issued by the financial sector companies meet their double rating requirements, production companies generally limit the ability of pension funds to invest in them by choosing single ratings for cost savings.
In order to be sure, investments in newspapers rated by an agency can potentially dilute the credit quality of pension fund portfolios. In the meantime, the increasing investment in short -term bonds can create difficulties for retirement funds in distributing income from these securities in a desired interest rate.
Over the past few months, long -term investors, such as insurance funds, asked Indian regulators more access to the country’s financial markets. Some of these demands are given, such as the permission to expand the risk protection tools and the promotion of new debt securities, reflecting the increasing stack of these players.
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