Bank of Baroda Becomes Second Public Sector Bank to Sponsor Pension Fund Under NPS

Bank of Baroda Becomes Second Public Sector Bank to Sponsor Pension Fund Under NPS

Introduction

• Pension Entry: Bank of Baroda (BoB) has entered the pension fund business and has become the second public sector bank (PSB) in India to get approval to sponsor a pension fund under the National Pension System (NPS).
• Regulatory Approval: This development came after the Pension Fund Regulatory and Development Authority (PFRDA) allowed eligible scheduled commercial banks to enter the pension fund business in 2026.
• Sector Expansion: This move is expected to bring more competition to India’s pension sector, give NPS subscribers more choices and help strengthen the country’s system of long-term retirement savings.

Bank of Baroda Gets PFRDA Approval

• Formal Entry: Bank of Baroda officially entered the pension fund business after receiving the Certificate of Appointment as Sponsor of a Pension Fund from PFRDA.
• Certificate Presentation: The certificate was presented to Debadatta Chand, Managing Director and CEO of Bank of Baroda, on October 1, 2026, during the NPS Divas 2026 event.
• Legal Provision: The appointment has been made under Section 27 of the PFRDA Act, 2013, which provides the legal basis for appointing sponsors of pension funds.
• Second PSB: With this approval, Bank of Baroda has become the second public sector bank to enter the pension fund business. This is an important step in the expansion of public sector banks into pension fund management.

Major Change in India’s Pension Sector

• Earlier Role: Earlier, banks mainly worked as Points of Presence (PoPs) for NPS. Their role included helping customers register for NPS, make contributions and use different NPS-related services.
• New Opportunity: Under the reforms introduced by PFRDA in 2026, eligible scheduled commercial banks can now independently set up and sponsor pension funds. This gives banks a more direct role in the pension sector.
• Greater Competition: These reforms are aimed at increasing competition in the pension sector, making the pension system stronger and giving NPS subscribers more choices when selecting pension fund managers.
• Eligibility Conditions: Banks that want to sponsor pension funds have to meet certain rules set by the regulator. These include requirements related to net worth, market capitalisation and financial soundness, along with other applicable conditions.

Why Bank of Baroda’s Entry Is Important

• Large Network: Bank of Baroda has a large banking network and a well-established customer base across urban and rural India. This gives the bank a strong opportunity to offer pension products to a large number of people.
• Wider Coverage: Its entry into pension fund management could help take retirement savings and NPS to more people across India. It may also encourage people who are not currently part of an organised pension scheme to start saving for their retirement.
• Healthy Competition: The entry of Bank of Baroda will increase competition among pension fund managers. This competition could encourage better services, improved digital facilities, new ideas and products that are more useful for customers.
• Strategic Expansion: This move shows that a major public sector bank is expanding beyond its traditional banking activities and entering the field of long-term retirement and investment management, which has significant potential for future growth.

PFRDA’s Ambitious NPS Expansion Target

• Subscriber Target: PFRDA wants to increase the number of people joining NPS by a large amount, especially among people who work outside the traditional government sector.
• Expansion Goal: According to recent reports, PFRDA is aiming to add around 2–4 crore new NPS subscribers over the next two to three years. This shows the regulator’s strong plan to increase the reach of NPS.
• Long-Term Vision: PFRDA has also set a long-term goal of bringing India’s workforce into the NPS system by 2047. This is part of its wider plan to increase retirement savings and pension coverage in the country.
• Current Subscribers: As of September 27, 2026, NPS had around 33 crore subscribers. This shows that NPS already has a large number of members, while there is still considerable scope to bring more people into the system.
• Assets Under Management: As of September 27, 2026, the NPS system had around ₹17.49 lakh crore in assets under management (AUM). This shows the growing financial importance and size of the pension system.

Focus on the Non-Government Sector

• Private Participation: PFRDA is giving increasing attention to employees and workers outside the traditional government pension system. The aim is to increase the number of people from the private and other non-government sectors who save regularly for their retirement.
• Growth Rate: According to PFRDA Chairman Ramann, the non-government segment is currently seeing subscriber growth of around 22–25%. This shows that interest in NPS is increasing among people outside the government sector.
• Untapped Potential: PFRDA believes that there is still a large opportunity to increase NPS participation among private-sector employees, self-employed persons, professionals and other workers who may not have a structured retirement savings plan.
• Broader Coverage: Increasing NPS participation among non-government workers is important for achieving PFRDA’s long-term aim of expanding pension coverage to a much larger part of India’s working population.

Digital Push by Bank of Baroda

• Digital NPS: Along with entering the pension fund business, Bank of Baroda has also taken steps to make its NPS services more digital and easier for customers to use.
• NPS Tatkal: The bank has onboarded NPS Tatkal on the BHIM app. This allows eligible customers to open NPS accounts through a digital process.
• Easy Onboarding: Digital account opening can reduce paperwork and make pension services easier to access. This can be especially useful for younger people and customers who are comfortable using digital banking services.
• Technology Focus: This digital initiative shows that Bank of Baroda is trying to combine its new pension business with technology-based services so that customers can access retirement investment products more easily.

Wider Pension-Sector Reforms in 2026

• Bank Sponsorship: Bank of Baroda’s entry into the pension fund business is part of a wider set of pension-sector reforms introduced by PFRDA in 2026.
• January Framework: In January 2026, PFRDA approved, in principle, a framework that allows scheduled commercial banks to independently set up pension funds. This created a new opportunity for banks to directly participate in the pension fund business.
• Fee Revision: PFRDA also changed the Investment Management Fee structure for pension funds from April 1, 2026. This was part of the regulator’s efforts to develop and improve the pension fund management system.
• Investment Reforms: Other reforms have also been introduced to increase investment opportunities under NPS and improve the overall pension system. The wider aim of these changes is to make NPS more useful, accessible and attractive to a larger number of people.

What It Means for NPS Subscribers

• Greater Choice: The entry of more banks as pension fund sponsors can give NPS subscribers more choices and greater competition when they select a pension fund manager.
• Better Services: More competition among pension fund managers may encourage them to improve their investment management, customer service and digital facilities in order to attract and retain subscribers.
• Market Risk: Pension investments remain subject to market-related risks, and returns are not guaranteed in investment options that are linked to the market.
• Investor Decision: NPS subscribers should consider their risk appetite and investment horizon before choosing their investment options. Their choice should depend on how much risk they are comfortable taking and how long they plan to keep their money invested.

Important Questions

1. Why has Bank of Baroda become significant in India’s pension fund sector?
2. What approval did PFRDA grant to Bank of Baroda, and under which provision of the PFRDA Act, 2013?
3. What are PFRDA’s targets for increasing NPS subscribers over the next two to three years and by 2047?
4. Why is PFRDA focusing on expanding NPS participation among the non-government workforce?
5. How could Bank of Baroda’s entry as a pension fund sponsor affect NPS subscribers and competition in the pension sector?

Conclusion

Bank of Baroda’s entry into the pension fund business marks an important development in India’s evolving retirement-savings landscape. By becoming the second public sector bank to sponsor a pension fund, BoB is participating directly in the expansion of the NPS ecosystem rather than limiting its role to providing banking and distribution services. The move comes at a time when PFRDA is seeking millions of new NPS subscribers and encouraging greater participation from the non-government workforce. With regulatory reforms, digital onboarding such as NPS Tatkal and greater competition among pension fund managers, India is moving towards a broader and more competitive pension ecosystem.