NPS schemes can now invest more in debt: Move aimed at enhancing scheme performance 1

NPS schemes can now invest more in debt: Move aimed at enhancing scheme performance

Changing the investment recommendations for some NPS schemes, the PFRDA has expanded the limits on investments in debt securities by way of those schemes. This has been carried out to allow extra flexibility for better scheme performance. “To provide flexibility to the pension finances to enhance the overall scheme performance depending upon the marketplace situation, it has been determined to grow the cap on Government Securities and associated investments and brief-term debt gadgets and associated investments through 5 percent each,” states a Pension Fund Regulatory and Development Authority (PFRDA) circular dated March 25, 2019.

According to the circular, those changes might be powerful from April 1, 2019. They will practice only the NPS – Central Government scheme (CG), State Government scheme (SG), Corporate Central Government (CG) scheme, Lite schemes of NPS, and Atal Pension Yojana. This trade has been completed. “To bring balance in returns over the long term and enhance the scheme’s performance, the PFRDA took this initiative,” professional assets said.

NPS schemes

Rating standards for investments beneath NPS schemes

In an initial round dated May 8, 2018, the PFRDA revised the rating criteria for investments under NPS. Earlier, according to PFRDA funding suggestions for NPS, the investments below scheme/asset magnificence were made most effectively in securities that had minimum AA score or equivalent from at least two credit rating businesses registered with SEBI. As in line with the round dated May 8, 2018, the improvement of the corporate bond market is anticipated to gain the investment universe as a whole by way of improving the liquidity and confidence inside the securities marketplace, and mainly the bond market wherein a significant proportion of NPS contributions are invested.

Consequently, the PFRDA had decided to allow the above-cited NPS schemes to invest in corporate bonds/securities that have a minimum of ‘A’ rating or equivalent, issue to cap at the funding among A and AA-rated bonds to be now not more than 10 percent of the general corporate bond portfolio (Scheme/Asset class C) of the pension fund. The round additionally required the pension finances to post a quarterly announcement of the investment made in the securities with a minimum rating of ‘A’ and their performance, including the downgrades in this category, if any, to NPS Trust for tracking such investments. Three


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