The Pension Fund Regulatory and Development Authority’s (PFRDA’s) decision to allow scheduled commercial banks to independently set up pension funds marks a structural shift in India’s retirement savings landscape. While the National Pension System (NPS) itself remains unchanged, experts say the move could materially alter how subscribers experience, access, and evaluate the product over time.
What changes for NPS subscribers?
For existing and new NPS subscribers, the immediate impact is not on the product design but on access and choice. According to Pratik Vaidya, managing director and chief vision officer at Karma Management Global Consulting Solutions Pvt. Ltd., bank participation expands the ecosystem rather than diluting it.
“The product does not change overnight, but the experience can. Banks have a wide retail footprint and strong digital rails, so on-boarding, servicing, and awareness can improve, especially outside metro circles,” Vaidya said, adding that more pension fund managers increase comparison and accountability while keeping NPS guardrails intact.
Ranjit Jha, managing director and chief executive officer at Rurash Financials, said familiarity plays a critical role.
“Investors now have more pension fund managers to choose from, entities they already have a long-standing relationship with. Integration with existing banking channels makes enrollment and contribution management significantly easier,” he explained.
Impact on competition, costs, and long-term returns
Experts broadly agree that increased bank participation is likely to intensify competition among pension fund managers. This, in turn, could benefit subscribers through lower costs and better service standards.
“More credible participants usually push the market in the right direction — lower costs, stronger disclosures, faster service, and sharper performance benchmarking,” Vaidya said, while cautioning that brand strength should not be confused with superior returns.
“Long-term outcomes will still depend on asset allocation, risk management, and execution quality.”
Jha pointed out that while PFRDA caps fees and prescribes investment norms, competition may still improve net returns.
“Downward pressure on management fees directly benefits subscribers. The competitive search for alpha could also lead to better diversification and fund management practices,” he said.
Vishwajeet Goel, head of Pensionbazaar, added that the move could accelerate product innovation.
“With the multiple scheme framework already in place, allowing banks to sponsor pension funds creates room for persona-based schemes and newer product designs,” he said.
Risks, safeguards, and what subscribers should watch
The main concern flagged by experts is conflict of interest. Banks may simultaneously act as distributors, relationship managers, and pension fund sponsors.
“This makes ring-fencing, independent trusteeship, and transparent disclosures essential,” Vaidya said, advising subscribers to track expense ratios and portfolio behaviour rather than rely on institutional familiarity.
Expanding NPS beyond salaried employees
Experts see the reform as a distribution-led push to widen NPS coverage among private-sector employees, gig workers, and informal earners.
“Banks already engage millions outside formal payrolls. For gig and informal workers, ease of contribution and portability matter more than complexity,” Vaidya said.
Jha added that banks’ rural and semi-urban reach could help formalise retirement savings for underserved segments, strengthening NPS’ role as a long-term income security tool rather than a compliance product.