The Pension Fund Regulatory and Development Authority (PFRDA) has released a new Master Circular on Investment Guidelines dated 10 December 2025, bringing together and superseding earlier circulars for UPS, NPS, NPS Lite, APY and APY Fund Scheme applicable to Central Government, State Government (default), Corporate CG and other government-sector subscribers.

The circular, issued under Section 14(2)(b) read with Section 23 of the PFRDA Act, 2013, aims to consolidate decades of investment norms, enhance transparency, and streamline compliance among Pension Funds and the NPS Trust.

Earlier Circulars Subsumed; New Guidelines Effective Immediately

The Master Circular replaces the previous circular dated 28 March 2025, along with all circulars and letters listed in its Appendix. However, PFRDA has clarified that:

All actions taken under earlier circulars will remain valid.
Rights, obligations, liabilities, and proceedings linked to earlier circulars will continue uninterrupted.

This ensures full continuity for both pension funds and subscribers while adopting the new framework.

Key Components of the New Investment Framework

The Master Circular provides detailed investment norms grouped under five broad categories.

1. Government Securities – Up to 65%

Pension Funds may invest up to 65% of scheme assets in:

Government Securities
Fully and unconditionally guaranteed securities
“Govt. of India Fully Serviced Bonds” issued post 3 June 2020 under EBR
G-Sec-dedicated mutual funds (up to 5% of the G-Sec portfolio)

A maximum of 10% of the G-Sec portfolio may be invested in guaranteed securities.

2. Debt Instruments – Up to 45%

This category includes a wide set of permissible debt investments such as:

Listed corporate bonds
Basel-III Tier-1 bonds (up to 2% of scheme AUM)
Rupee bonds issued by IBRD, IFC, ADB
Term deposits of eligible scheduled commercial banks (subject to strict NPAs, profit history and CRAR conditions)
Debt mutual funds (up to 5% of the debt portfolio)
REIT/InvIT debt instruments
Infrastructure-related bonds, including those issued by Indian Railways and Government authorities

Rating requirements are stringent, with AA or above required across most categories.

Pension Funds may also invest below AA ratings only within a tightly capped 10% exposure, and excess exposure must be fully covered by Credit Default Swaps (CDS).

3. Short-Term Debt & Money Market – Up to 10%

Short-term investments may include:

Treasury Bills
Commercial Papers (must be A1+ rated by at least two agencies)
Certificates of Deposit
Units of short-duration mutual funds
Lending in TREPS through CCIL

Banks issuing CDs or TDRs must meet the same financial criteria applied under the main debt category.

4. Equities & Related Investments – Up to 25%

Equity exposure is allowed through:

Stocks in the NIFTY 250 Index, and BSE 250 constituents not in NIFTY 250
Equity Mutual Funds (up to 5% of equity portfolio)
ETFs replicating Nifty 50 or BSE Sensex
ETFs created for Government disinvestment
IPO, FPO, OFS, subject to strict eligibility and reporting norms

PFRDA mandates that 90% of Equity AUM be invested in the top 200 stocks of the NIFTY 250 index.

5. Asset-Backed, Trust-Structured & Miscellaneous – Up to 5%

This includes:

RMBS/CMBS
REIT units
InvIT units
SEBI-regulated AIF Category I & II
Gold and Silver ETFs (aggregate cap of 1% each of scheme AUM)

AIF investments must meet corpus, eligibility, sponsor-restriction, and asset-allocation norms.

Additional Restrictions and Portfolio Controls

The circular also introduces robust safeguards to manage concentration risk:

Equity Exposure Caps

Up to 5% of paid-up capital of sponsor-group companies
Up to 10% for non-sponsor companies

Debt Exposure Caps

Up to 5% of net worth of sponsor-group companies
Up to 10% for non-sponsor companies

Industry-wise Exposure

Exposure to any single industry capped at 15% of total AUM.
Bank FDs are exempt from this limit.

InvITs/REITs

Cumulative investments capped at 3% of total AUM.

Brokerage Limits

Brokerage on equity transactions is capped at 0.03%, inclusive of stamp duty and taxes.

Rules for IPO/FPO/OFS Participation

Pension Funds may invest in public offerings only if:

IPOs are proposed to be listed on BSE/NSE and meet minimum float criteria
FPO/OFS shares belong to the Top-250 NIFTY list
Investments are reported to NPS Trust within 30 days
Non-compliant IPO investments must be exited within one year of listing

NPS Tier-II Tax Saver Scheme (TTS) Investment Limits

The circular prescribes:

Asset Class	Allowed Allocation
Equity	10%–25%
Debt	Up to 90%
Cash/Money Market & Liquid MF	Up to 20% (after corpus reaches ₹5 crore)

Increase in Overall Asset Class Flexibility

PFRDA has increased the combined caps across asset classes from 140% to 150%, providing greater flexibility for Pension Funds to manage risk-return strategies.

Comprehensive List of Consolidated Circulars

The Appendix of the document lists 27 circulars, ranging from 2013 to 2025, now merged into this single Master Circular. This unifies guidance related to investment ratings, IPO participation, operational norms, APY fund management, and more.

Conclusion

With this Master Circular, PFRDA has delivered a fully harmonised investment framework for all Government-Sector pension schemes—including UPS, NPS, NPS Lite, APY, and APY Fund. The consolidation enhances clarity, reduces compliance burden, and strengthens risk management protocols across Pension Funds and the NPS Trust.

View Original Circular: