Due to technological intervention of PFRDA, the contributions made to NPS account till 11 am will be invested the very same day. Earlier, it was being invested the next day depriving investors of one day return. It was enriching the Trustee Bank with free float income.
Pension Fund Regulatory Development Authority (PFRDA) has given a bonanza to National Pension Scheme (NPS) investors. From 1st of July 2024 onwards, contribution to NPS account will be invested the same day. What does it mean?
Till now, the contribution made to NPS account through UPI, QR Code, e-NPS and other banking means were taken into consideration the next day. This means the subscribers of NPS were losing one day return on their investment. In technical parlance, this is called T+1 settlement cycle.
The PFRDA brought out a circular on 26th June 2024, saying that the contributions received through different modes of payment till 11 am on a particular day will be sent for investment the same day. Earlier, the investment received on a particular day was taken into consideration from the very next day. In this way, the subscribers of NPA were losing one day of interest/return on their investment. In financial market scenario, a ‘single day’ may prove game changer.
The PFRDA circular is bound to impact the float income of Trustee Bank. Trustee Bank is the bank of account of PFRDA, wherein a NPS subscriber deposits his money. Given the fact that there are more than 6 crore NPS subscribers who deposit who infuse combined deposit of Rs 1 lakh crore per annum in NPS, the float income of a single day in SBI liquid fund will fall somewhere around 20 crores. The Trustee bank was getting this much income from NPS subscribers’ contribution for no reason.
Kudos to PFRDA for such an investor friendly step.
