Master Circular on Investment Guidelines under NPS in Non-Government Sector | PFRDA master_circular · Complied AI

Document text

PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY

MASTER CIRCULAR

PFRDA/Master Circular/2025/06/PF-04 | 10th December 2025

To The CEOs of All Pension Funds & NPS Trust NPS Stake Holders

SUBJECT: Master Circular on Investment Guidelines under NPS in Non-Government Sector

This Master Circular is being issued in exercise of powers of the Authority conferred under sub-clause (b) of sub-section (2) of Section 14 read with Section 23 of the PFRDA Act, 2013 and sub-regulation (1) of Regulation 14 of PFRDA (Pension Fund) Regulations, 2015 as amended from time to time.
The investment guidelines prescribed under this Master Circular shall apply to NPS Tier-I and Tier-II accounts in the Non-Government Sector (NGS). The NGS comprises all NPS sectors other than the Central/State Government (default), Corporate CG, NPS Lite and APY. This master circular supersedes the provisions of the earlier master circular 28.03.2025.
This master circular shall come into effect immediately.

Yours sincerely

K MOHAN GANDHI Chief General Manager

Appendix

INDEX
Part I – Introduction
Part II – General Guidelines
Part III – Investment Guidelines
Part IV – List of circulars/ letters consolidated in the Master Circular

Part I – Introduction

The Pension Fund Regulatory and Development Authority (Pension Fund) Regulations, 2015, as amended from time to time, stipulate that the pension funds shall manage the pension schemes in accordance with the investment guidelines issued by the Authority for the benefit of the subscribers.

Part II – General Guidelines

i. The compliance obligation of the intermediary/entity shall not be confined merely to the Master Circular but, also the applicable laws.

ii. This Master Circular shall take effect immediately but shall be without prejudice to their (earlier issued circulars) operation and effect, for the period when they were in force, until them being subsumed under the Master Circular. Based on the above caveat, Part IV containing the list of circulars/ letters consolidated in the Master Circular shall stand rescinded with the issuance of this Master Circular, such that they are subsumed in the Master Circular and for all purpose and intent, remain operative, with no break of continuity.

iii. Notwithstanding such rescission of any circular, upon their merger in the Master Circular, or otherwise, anything done or any action taken or purported to have been done or taken, or to be taken hereafter, under the circulars/ letters now rescinded (for the period of their operation) shall be construed to have been validly taken as if the said circulars are in full force and effect and shall remain unaffected by their rescission, in any manner.

iv. The previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred, any penalty, any order passed, any violation committed, any investigation, legal proceedings pending in terms of the circular (now rescinded), shall be treated as if the circulars are in full force and effect, and shall remain unaffected by their rescission, in any manner.

Part III – Investment Guidelines

The Investment Guidelines for NPS Tier-I & Tier-II {Other than UPS/Central/State Government (default), Corporate CG, NPS Lite, APY and UPS} are as under –

Investment Guidelines – Non-Government Sector

Scheme / Asset Class G
(a) Government Securities.
(b) Other Securities {‘Securities' as defined in section 2(h) of the Securities Contracts (Regulation) Act, 1956} the principal whereof and interest whereon is fully and unconditionally guaranteed by the Central Government or any State Government and also includes “Govt. of India - Fully Serviced Bonds” issued by Public Sector Undertakings under Extra Budgetary Resources after 3rd Jun 2020.
Provided that investments under this sub-category of securities shall not exceed 10% of the AUM under Scheme/Asset Class G at any point of time.
(c) Units of Mutual Funds set up as dedicated funds for investment in Govt. securities and regulated by SEBI.
Provided that the investments in such mutual funds shall not exceed 5% of the AUM under Scheme/Asset Class G at any point of time.

Scheme / Asset Class C
(a) Listed (or proposed to be listed in case of fresh issue) debt securities issued by body corporates, including banks and public financial institutions (Public Financial Institutions as defined under Section 2 of the Companies Act, 2013).
(b) Rupee Bonds issued by the International Bank for Reconstruction and Development, International Finance Corporation and Asian Development Bank.
(c) Term Deposit receipts of more than one year duration issued by scheduled commercial banks, which meets the regulatory requirement of Net-worth and Capital to Risk Weighted Asset Ratio as stipulated by RBI and additionally satisfy the following conditions on the basis of published annual report(s) for the most recent years, as required to have been published by them under law:
(i) having declared profit in the immediately preceding three financial years;
(ii) having net non-performing assets of not more than 4% of the net advances;
Provided that such Term Deposits with any one scheduled commercial bank including its subsidiaries shall not exceed 10% of the AUM under Scheme/Asset Class C at any point of time.
(d) Units of Debt Schemes of Mutual Funds as regulated by SEBI.
Provided that these schemes shall exclude schemes of mutual funds having investment in short term debt securities with Macaulay Duration of less than 1 year.
Provided further that the portfolio invested in such mutual funds shall not exceed 5% of the AUM under Scheme/ Asset Class C at any point of time.

Scheme / Asset Class C
(e) Debt securities issued by Real Estate Investment Trusts (REIT) regulated by SEBI.
(f) Debt securities issued by Infrastructure Investment Trusts (InVIT) regulated by SEBI.
(g) The following infrastructure related debt instruments:
(i) Listed (or proposed to be listed in case of fresh issue) debt securities issued by body corporates engaged mainly in the business of development or operation and maintenance of infrastructure, or development, construction or finance of affordable housing.
Further, this category shall also include securities issued by Indian Railways or any of the body corporates in which it has majority shareholding.
This category shall also include securities issued by any Authority of the Government which is not a body corporate and has been formed mainly with the purpose of promoting development of infrastructure.
It is further clarified that any structural obligation undertaken or letter of comfort issued by the Central Government, Indian Railways or any Authority of the Central Government, for any security issued by a body corporate engaged in the business of infrastructure, which notwithstanding the terms in the letter of comfort or the obligation undertaken, fails to enable its inclusion as security covered under ‘Other Securities of Scheme/Asset Class G’, shall be treated as an eligible security under this sub-category.
(ii) Infrastructure and affordable housing Bonds issued by any scheduled commercial bank, which meets the conditions specified in sub-category (c) above.
(iii) Listed (or proposed to be listed in case of fresh issue) securities issued by Infrastructure Debt Funds operating as a Non-Banking Financial Company and regulated by RBI.

Scheme / Asset Class C
(j) Commercial mortgage-based securities or Residential mortgage-based securities.
(k) Asset Backed Securities regulated by SEBI
(l) Units of InvITs regulated by SEBI
(m) Investment in SEBI Regulated debt oriented ‘Alternative Investment Funds’ (Category I and Category II only)
(n) Listed (or proposed to be listed in case of initial offering) Basel III Tier-I bonds issued by scheduled commercial banks, AIFIs and Govt owned NBFCs under RBI guidelines.
Provided that the aggregate investment under sub category (l), (m), (n) i.e. Units of InvITs, debt-oriented AIFs and Basel III Tier I Bonds shall not exceed 5% of the AUM of Scheme / Asset Class C.
Provided that investment shall only be in listed instruments or fresh issues that are proposed to be listed except in case of sub-category (j) (k) and (m) (i.e., CMBS/RMBS, ABS and debt-oriented AIFs) above.
Provided further that investment under sub-category (j, k, l & n) above (i.e., CMBS/RMBS, ABS, InvITs & Basel III Tier I bonds by SCBs, AIFIs and Govt owned NBFCs under RBI) shall be made only in such securities which have minimum ‘AA’ or equivalent rating in the applicable rating scale. For sub-category (l & n) (i.e., InvITs & Basel III Tier I bonds by SCBs, AIFIs and Govt owned NBFCs under RBI) the rating should be from at least two credit rating agencies registered with the SEBI and if the securities/entities have been rated by more than two rating agencies, the two lowest of the ratings shall be considered and for sub-category (j & k) (i.e., CMBS/RMBS, ABS) rating from only one credit rating agency will be sufficient.
Provided further that in case of sub-category (l) (i.e., units of InvITs), the Trust should have minimum rating of ‘AA’ or equivalent rating in the applicable rating scale from at least two credit rating agencies registered by SEBI.

Scheme / Asset Class C
(v) Pension Funds to ensure that funds should not be invested in securities of the companies or Funds incorporated and operated outside the India in violation of Section 25 of the PFRDA Act 2013.
(vi) The sponsors of the Alternative investment funds should not be the promoter in Pension Fund or the promoter group of the Pension Fund.
(vii) The AIFs shall not be managed by Investment manager, who is directly or indirectly controlled or managed by Pension Fund or the promoter group of the Pension Fund.
Investment in sub-category (n) (i.e., Basel III Tier I bond by SCBs, AIFIs and Govt owned NBFCs under RBI) is allowed provided:
(i) at any point of time, the total portfolio invested in this sub-category shall not exceed 5% of the total AUM managed by the Pension Fund under Scheme/Asset Class G, C & E for both Tier-I & Tier-II.
(ii) No investment in this sub-category in initial offerings shall exceed 20% of the initial offering. Further, at any point of time, the aggregate value of Tier I bonds of any particular Bank held across all schemes managed by the Pension Fund shall not exceed 20% of such Tier I Bonds issued by that Bank/AIFI/Govt owned NBFC.
(iii) The investment by Pension Fund in a single issuer shall not exceed 10% of the AUM under Scheme/Asset Class C.
Provided that the investment under the sub-categories (a), (g) (i) to (iii) and (h) of Scheme/Asset Class C shall be made in such securities with at least AA rating or equivalent in the applicable rating scale from at least two credit rating agencies registered with SEBI. However, Pension Fund can invest up to 10% of the total debt instruments portfolio in such securities with AA rating or above in the applicable rating scale that are rated by a single rated agency registered with SEBI.
Provided further that in case of the sub-category (g) (iii) the ratings shall relate to the Non-Banking Financial Company.

Scheme / Asset Class C
Provided further that if the securities/entities have been rated by more than two rating agencies, the two lowest of all the ratings shall be considered.
For sub-category (b), a single rating of AA or above by a domestic or international rating agency will be acceptable.
For sub-category (a) and (b), the investments made in debt securities and Rupee Bonds with residual maturity period of less than three years on the date of investment shall be limited to 10% of the investments made in Scheme/Asset Class C during the preceding 12 months.
In case of securities where the principal is to be repaid in a single pay out, the maturity of the securities shall mean residual maturity. In case the principal is to be repaid in more than one payout, then the maturity of the securities shall be calculated on the basis of weighted average maturity of the security.
For sub-category (e), (f) and (l) the Trust should be rated as ‘AA’ or equivalent in the applicable rating scale by at least two credit rating agencies registered with SEBI.
It is clarified that debt securities covered under ‘Other Securities of Scheme/Asset Class G’ are excluded from Scheme/Asset Class C. However, “Govt. of India - Fully Serviced Bonds” issued by Public Sector Undertakings under Extra Budgetary Resources prior to 3rd Jun 2020 may be retained under this category.

Scheme / Asset Class E
(a) Stocks which are constituents of NIFTY 250 Index are eligible for investments. However, constituent stocks of BSE 250 Index which are not part of NIFTY 250 are also eligible for investments.
Provided that 90% of the Asset Class / Scheme AUM shall be invested only in to the top 200 stocks of NIFTY 250 Index with flexibility to invest up to 10% in the remaining eligible stocks.
(b) Units of equity schemes of mutual funds regulated by SEBI, which have minimum 65% of their investment in shares of body corporates listed on BSE or NSE.
Provided that investment under such mutual funds shall not exceed 5% of the AUM under Scheme/Asset Class E at any point in time and the fresh investment in such mutual funds shall not exceed 5% of the fresh inflows invested in the year.
(c) Exchange Traded Funds (ETFs)/Index Funds regulated by SEBI that replicate the portfolio of either BSE Sensex Index or NSE Nifty 50 Index.
(d) Exchange Traded Funds regulated by SEBI that are constructed specifically for disinvestment of shareholding of the Government of India in body corporates.
(e) Exchange Traded Derivatives regulated by SEBI having the underlying of any permissible listed stock or any of the permissible indices (BSE Sensex Index or NSE Nifty 50 Index), with the sole purpose of hedging.

Scheme / Asset Class E
Provided that the portfolio invested in derivatives in terms of contract value not exceed 5% of the AUM under Scheme/Asset Class E at any point of time.
(f) Initial Public Offering (IPO), Follow on Public Offer (FPO) and Offer for Sale (OFS) of companies, approved by SEBI subject to fulfilment of the following conditions: -
(i) Equity offering through IPO are proposed to be “listed” in BSE or NSE and full float market capitalization calculated at lower band of IPO issue price should be equivalent or greater than the market capitalization of the 250th company as per the NIFTY 250 Index list.
(ii) Shares offered under Follow on Public Offer (FPO)/Offer for Sale (OFS) should be listed on BSE or NSE and constituent in the list of Top 250 stocks as per the Nifty 250 Index.
(iii) Board approved Investment Policy of Pension Funds should contain detailed guidelines/procedure for investments in IPO. Investments in Equity Shares through IPO/FPO or OFS shall be reported to NPS Trust within 30 days from the date of investment.
(iv) In case a Pension Fund has invested through IPO and it fails to be in the latest published list of NIFTY 250 Index, a time period of maximum one year from the date of listing shall be provided to the Pension Fund for making a decision on exiting such shares.
(v) PFs are allowed to invest in Shares through Secondary Market, eligible under i & ii.
Subsequent to any changes in the NIFTY 250 Index, Pension Funds would have to rebalance their portfolios in line with eligible stocks, within a period of six months.
(g) Units issued by Real Estate Investment Trusts regulated by SEBI.
(h) Investment in SEBI Regulated Equity oriented ‘Alternative Investment Funds’ (Category I and Category II only)

Scheme / Asset Class E
Investments in sub-category (h) (i.e. AIF – Cat. I and Cat. II) is allowed subject to: -
(i) The permitted funds under category I are Start-up Funds, Infrastructure Funds, SME Funds, Venture Capital Funds and Social Venture Capital Funds as detailed in Alternative Investment Funds Regulations, 2012 by SEBI.
(ii) For category II AIF as per Alternative Investment Funds Regulations, 2012 by SEBI, at least 51% of the funds of such AIF shall be invested in either of the Start-up entities, infrastructure entities or SMEs or venture capital or social welfare entities.
(iii) Pension Fund shall invest only in those AIFs whose corpus is equal to or more than Rs.100 crore.
(iv) The exposure to single AIF shall not exceed 10% of the AIF size.
(v) Pension Funds to ensure that funds should not be invested in securities of the companies or Funds incorporated and operated outside the India in violation of Section 25 of the PFRDA Act 2013.
(vi) The sponsors of the Alternative investment funds should not be the promoter in Pension Fund or the promoter group of the Pension Fund.
(vii) The AIFs shall not be managed by Investment manager, who is directly or indirectly controlled or managed by Pension Fund or the promoter group of the Pension Fund.
In addition to the permissible instruments of investments as mentioned above for each Scheme/Asset Class, Pension Fund can temporarily park the inflows/funds in short-term debt instruments and related investments as noted below subject to the following limits;
(i) 10% of AUM for each of the Scheme/Asset Class under NPS Tier-I

Short-term debt instruments and related investments
(a) Money market instruments comprising of Treasury Bills, Commercial Paper and Certificates of Deposit
Provided that investment in Commercial Paper issued by body corporates shall be made only in such instruments which have minimum rating of A1 + by at least two credit rating agencies registered with the SEBI.
Provided further that if Commercial Paper has been rated by more than two rating agencies, the two lowest of the ratings shall be considered.

Short-term debt instruments and related investments
Provided further that investment in this sub-category in Certificates of Deposit of up to one year duration issued by scheduled commercial banks, will require the bank to satisfy all conditions mentioned in point no. (c) of Scheme/Asset Class C’
(b) Term Deposit Receipts of up to one year duration issued by such scheduled commercial banks which satisfy all conditions mentioned in point no. (c) of Scheme/Asset Class C’.
(c) Investments in units of a debt scheme of a mutual fund as regulated by SEBI where investment is in short term securities with Macaulay duration of less than 1 year viz. Overnight fund, Liquid Fund, Ultra Short Duration Fund and Low duration fund with the condition that the average total asset under management of AMC for the most recent six-month period should be at least Rs. 5,000 crores.
(d) Investments in Government Securities as Lender in Triparty Repo conducted over the Triparty Repo (Dealing) System (TREPS) provided by RBI through Clearing Corporation of India Limited (CCIL).

At any given point of time the portfolio under each Scheme/Asset Class should adhere to the permissible instruments of investments and also should not exceed the maximum limit prescribed for the sub-categories, if any. However, asset switch because of any RBI mandated Government debt switch would not be covered under this restriction.
If for any of the instruments mentioned above, the rating falls below the minimum permissible grade prescribed for investment in that instrument when it was purchased, as confirmed by one credit rating agency, the option of exit shall be considered and exercised, as appropriate, in a manner that is in the best interest of the subscribers.
The prudent investment of the inflows/funds within the prescribed pattern is the fiduciary responsibility of the Pension Fund. NPS Trust shall monitor the investment decisions of the Pension Funds with utmost due diligence.
The Pension Fund and NPS Trust will take suitable steps to control and optimize the cost of management of the schemes.
The NPS Trust and Pension Fund will ensure that the process of investment is accountable and transparent. It should be ensured that due diligence is carried out to assess risks associated with any particular asset before investment is made by the Pension Fund in that particular asset and also during the period over which it is held in the scheme. The requirement of ratings as mandated in this circular merely intends to limit the risk associated with investments at a broad and general level. Accordingly, it should not be construed in any manner as an endorsement for investment in any asset satisfying the minimum prescribed rating or a substitute for the due diligence prescribed for being carried out by the Pension Fund.
For equity investments through stock brokers, the amount of brokerage that can be debited to the schemes shall not exceed 0.03% of the equity transaction amount inclusive of stamp duty and applicable taxes.
The following restrictions/filters/exposure norms would be applicable to reduce concentration risks. It would, however, not be applicable to any of the Scheme/Asset Class under NPS Tier-I & II till the Scheme/Asset Class AUM reaches Rs 5 crore.

a) NPS Equity investments have been restricted to 5% of the ‘paid up equity capital of all the sponsor group companies or 5% of the total AUM managed by the Pension Fund under Scheme/Asset Class G, C & E. for both Tier-I & Tier-II, whichever is lower, in each respective scheme and 15% in the paid-up equity capital of all the non-sponsor group companies or 15% of the Scheme AUM whichever is lower, in each respective scheme.

Paid up share capital: Paid up share capital means market value of paid up and subscribed equity capital.

‘Sponsor’ shall mean an entity described as “Sponsor” under Pension Fund Regulatory and Development Authority (Pension Fund) Regulations, 2015 and subsequent amendments thereto.

‘Group’ means two or more individuals, association of individuals, firms, trusts, trustees or bodies corporate, or any combination thereof, which exercises, or is established to be in a position to exercise, significant influence and / or control, directly or indirectly, over any associate as defined in Accounting Standard (AS), body corporate, firm or trust, or use of common brand names, Associated persons, as may be stipulated by the Authority.

Explanation: Use of common brand names in conjunction with other parameters of significant influence and / or control whether direct or indirect shall be reckoned for determination for inclusion as forming part of the group or otherwise.

All Pension Funds shall publish on their respective website a list of their group companies and those of their sponsor.

b) NPS Debt investments have been restricted to 5% of the ‘net-worth’# of all the sponsor group companies or 5% of the Scheme AUM whichever is lower in each respective scheme and 10% of the net-worth of all the non-sponsor group companies or 10% of the Scheme AUM whichever is lower, in each respective scheme.

Net Worth: Net worth would comprise of Paid-up capital plus Free Reserves including Share Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets.

c) Investment exposure to a single Industry shall be restricted to 15% of AUM under all Schemes managed by each Pension Fund as per Level-5 of NIC classification. Investment in scheduled commercial bank FDs would be exempted from exposure to Banking Sector.

d) For investments made in Index Funds/ETF/Debt MF, the exposure limits under such Index Funds/ETF/Debt MF shall not be considered for compliance of the prescribed Industry Concentration, Sponsor/ Non-Sponsor group norms under these guidelines.

e) Investment exposure norms for InvITs/REITs shall be as under:

(i) Cumulative Investments in Units and Debt Instruments of InvITs and REITs shall not exceed 3% of total AUM of the Pension Fund at any point of time.

(ii) Pension Fund shall not invest more than 15% of the total outstanding debt instruments issued by single InvIT/REIT issuer.

(iii) Pension Fund shall not invest more than 5% of the Units issued by a single InvIT/REIT issue.

The value of funds invested by Pension Fund in any mutual funds mentioned in any of the categories or ETFs or Index Funds shall be reduced from the respective scheme AUM, before computation of investment management fees payable to them, to avoid double incidence of costs. However, investments made by Pension Funds in MFs (until the Scheme AUM reached Rs. 5 crores), in ETFs/Index Funds for the purpose of disinvestment of shareholding of the Government of India in body corporates, Bharat Bond ETF/Debt ETF issued by Government of India in respect of bonds issued by CPSEs, CPSUs, CPFIs and other Government organizations, Gold and Silver ETFs and all short duration mutual funds (liquid mutual fund, overnight fund ultra-short duration fund etc.) as permitted by SEBI, would be eligible for payment of investment management fee.
Transfer of securities within schemes or inter scheme are allowed only if such transfers are done at the prevailing market price for traded instruments or at the valuation price for non-traded instruments and the securities so transferred are in conformity with the investment objective of the scheme to which such transfer has been made. Such transfers may be allowed in following scenarios:

(i) To meet liquidity requirement in a scheme in case of unanticipated redemption pressure

(ii) To adjust securities received through corporate action.

The inter scheme transfers are allowed only on exceptional basis. The Pension Fund shall inform NPS Trust and Authority upon exercise of this option.

Pension Fund are permitted to keep securities as margin with the CCIL for margin requirements for investment in Government securities and Triparty Repo (Dealing) System (TREPS).
For National Pension Scheme Tier II - Tax Saver Scheme, 2020 (NPS–TTS) which is available for subscription only by Central Government employees, the following investments limits will apply:

Asset Class	Limits
Equity (as per Asset Class E of NPS Tier-II)	10% - 25%
Debt (as per Asset Class C & G NPS Tier-II)	Up to 90%
Cash/Money Market, Liquid Mutual Funds*	Up to 20%

this limit shall be applicable only after the scheme corpus reaches Rs 5 crore.

Part IV – List of circulars consolidated in the Master Circular

No.	Circular Name	Date	Circular No.
1.	Clarifications on Investment Guidelines for Private Sector NPS	17-04-2013	PFRDA/2013/9/PFM/3
2.	Accounting Policy for Inflation Linked Bonds	11-12-2013	PFRDA/2013/19/PFM/5
3.	Revision of Investment Guidelines for NPS Schemes	29-01-2014	PFRDA/2014/02/PFM/1
4.	Investment in Basel -III compliant Additional Tier I Bonds.	22-09-2014	PFRDA/2014/06/PFM/04
5.	Clarification on Revision of Investment Guidelines for NPS Scheme issued on 29.01.2014

Master Circular on Investment Guidelines under NPS in Non-Government Sector

Source details

Document text

PENSION FUND REGULATORY AND DEVELOPMENT AUTHORITY

Find the provision behind this update.

Related PFRDA updates