The government has in-principle decided to allow foreign direct investment in the pension sector, but the FDI limit would be decided by the new interim regulator.

"The FDI limit in pension sector has not been decided, but the government has in-principle decided to encourage foreign funds in a big way," U K Sinha, joint secretary (capital markets), told reporters in New Delhi on Wednesday.

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However, the FDI limit would be set by the interim Pension Fund Regulatory and Development Authority, which would be put in place by the end of this year, he said.

Indications are that the FDI limit in pension may be 100 per cent as it is for mutual funds. It may also be capped at 26 per cent as it is for insurance companies.

Many of the leading global pension funds have evinced interest in entering India, Sinha said, adding it would be too immature to name the companies.

He said that the government has also decided in-principle to allow pension funds to invest in overseas markets.

The details would be worked out by the pension regulator, he added.

On hiking the sectoral cap in telecom, insurance and other sectors, Ashok Lahiri, chief economic advisor, said, "All I can say, is that the Cabinet approval is awaited."

The government intends to hike the FDI limit in insurance to 49 per cent from the present limit of 26 per cent.