PFRDA master_circular PFRDA/Master Circular/2025/06/PF-04 · 10 Dec 2025
Official title
Master Circular on Investment Guidelines under NPS in Non-Government Sector
Summary
Check the official recordThe Pension Fund Regulatory and Development Authority (PFRDA) has issued a Master Circular consolidating investment guidelines for NPS Tier-I and Tier-II accounts in the Non-Government Sector (NGS). This circular supersedes the previous master circular dated 28 March 2025. It prescribes specific asset allocation limits and eligibility criteria for investments in Government Securities (Asset Class G), Debt Securities (Asset Class C), and Equity (Asset Class E). Pension funds are required to adhere to these investment patterns, maintain fiduciary responsibility, and ensure due diligence in risk assessment. The circular also establishes concentration norms, exposure limits for sponsor/non-sponsor groups, and specific requirements for alternative investment funds and infrastructure-related instruments. These guidelines are effective immediately.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
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. |
| (iv) Listed (or proposed to be listed in case of fresh issue) units issued by Infrastructure Debt Funds operating as a Mutual Fund and regulated by SEBI. |
| It is clarified that, barring exceptions mentioned above, for the purpose of this sub-category (g), a sector shall be treated as part of infrastructure as per Government of India's harmonized master-list of infrastructure sub-sectors. |
| (h) Listed or proposed to be listed credit rated Municipal Bonds. |
| (i) Investment in units of Debt ETFs issued by Government of India specifically meant to invest in bonds issued by Government owned entities such as CPSEs, CPSUs/CPFIs and other Government organizations, etc. |
| Provided that the portfolio invested in such Debt ETFs shall not exceed 5% of the AUM under Scheme/Asset Class C at any point of time. |
| 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. |
| Investments in sub-category (m) (i.e., debt-oriented 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. |
| 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. |
| Provided further that under sub-category (g), Pension Fund can make investment in infrastructure companies rated not less than ‘A’ along with an Expected Loss Rating of ‘EL1’. |
| Further, though investments in Scheme/Asset Class C require at least AA rating as specified above, Pension Fund can invest in securities having investment grade rating below ‘AA’, provided that, investments in securities rated from ‘AA-’ to ‘A’ shall not exceed 10% of the AUM under Scheme/Asset Class C while making such investment. |
| Any investments in securities rated below ‘AA’ in excess of 10% of the of the AUM under Scheme/Asset Class C the risk of default for such securities shall be fully covered with Credit Default Swaps (CDSs) issued under Guidelines of the RBI and purchased along with the underlying securities. Purchase amount of such Swaps shall be considered to be investment made under this category. |
| 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) |
| (i) Units issued by Gold and Silver ETF regulated by SEBI. |
| Provided that the aggregate investment under sub category (g), (h) and (i) i.e. Units of REITs, Equity oriented AIFs, and Gold, Silver ETF shall not exceed 5% of the AUM of Scheme / Asset Class E. |
| Provided that investment shall only be in listed instruments or fresh issues that are proposed to be listed except in case of sub-category (h) (i.e., equity-oriented AIFs) above. |
| Provided further that in case of sub-category (g) (i.e., units of REITs), 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 and if the securities/entities have been rated by more than two rating agencies, the two lowest of the ratings shall be considered. |
| 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 |
| (ii) 20% of AUM for each of the Scheme/Asset Class under NPS Tier-II |
| (iii) the aforesaid limits shall not be applicable till the AUM of the respective Scheme/Asset Class reaches Rs 5 crore. |
| 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). |
