While many funds will be evaluating the impact COVID-19 might have on their businesses, the pension funds' regulator claims that it doesn’t see the pandemic hurting its assets under management (AUM). Pension Fund Regulatory and Development Authority (PFRDA), chairman, Supratim Bandyopadhyay in a conversation with Jescilia Karayamparambil, talked about his future outlook.
PFRDA hopes to reach 3- crore subscriber mark under Atal Pension Scheme. Will the pandemic hurt it?
Definitely. But it is not impossible. The next three to six months are very crucial. We are hopeful we will come out of it. Even last year, our intermediaries did well. This financial year 2020- 2021, we are not only looking at repeating last year’s performance but also exceeding it as well. But the challenge will be more this year.
There are talks about layoffs, delay in payments to employees and others. Do you see that impacting pension funds’ AUMs?
Around 80% of our AUM is based on government employees — central, state and autonomous bodies— where we do not see changes this year. Rather it will go up. The balance of 20% will come from corporates and other retail customers. I do not see any change in case of large corporates. But for small institutions, there will be a challenge.
We think there will be some delay from corporates. The best part of NPS is there is no due date or penalty in case of last payment. These are inbuilt in a system. So, in case of delay, no one will suffer nor the account will be deactivated.
For retail customers, it will be a challenge. But the retail customers can keep their accounts running by paying even Rs 1,000 . All these features have nothing to do with the pandemic, it was always be there in the system.
Do you think this flexibility feature might attract more funds to NPS?
There are chances more corporates and individuals might opt for NPS. But the other factors that encourage corporates and the public sector to shift to NPS are due to high returns and the given tax benefits — for employees and employers.
Chances are many companies may go bankrupt due to pandemic. Do you see that hurting returns? Most of our exposure is in government securities (50- 55%), rest is in equity (15- 20%, and corporate bonds (25-30%). In the case of corporate bonds, only top companies mostly public sector units (PSU) or PSU-oriented companies have been chosen.
So, we don’t see a default in that area. Some corporates will face some problems but our exposure to private corporates is limited to good names. In their case, there might be some delay in payment of coupon interest.
But I do not think default will take place. Keeping in mind the situation, a moratorium has been extended. So, I doubt there will be a lot of bankruptcy cases. This temporary issue might hurt businesses now, but within six months time, everything will be sorted.
Will subscribers affected with COVID-19 be able to partially withdraw funds?
Yes, the circular for the same will be out soon. Around 25% partial withdrawal is allowed for critical illness, education, children’s marriage and others. Under critical illness, we have added COVID-19. So, if a subscriber's family member is affected with COVID-19, still he or she can withdraw funds.