Finance Minister Jaswant Singh said on Friday interest rates on pension funds needed to be brought in line with declining interest rates in the market.
"Yes, rates are declining, but as far as pensioners, retired and widowed are concerned, they are a high risk category, and we are concerned about maintaining their returns," Singh told reporters.
"But at the same time there is a need to rationalise pension rates."
India's largest state-run pension fund continues to offer a 9.5 per cent interest rate on its Employees Provident Fund scheme, despite pleas from the finance ministry to offer lower rates in line with the government and Reserve Bank of India's policy of softer rates.
Singh also said India's economy, the world's 12th largest, would face problems if global oil prices rose, but added that India had adequate foreign exchange reserves to tide over any such price rise.