National Pension System Exit and Withdrawal Rules: The PFRDA has introduced instant bank account verification through the penny drop method to ensure timely credit of the amount to the bank account
National Pension System Exit and Withdrawal Rules: The Pension Fund Regulatory and Development Authority (PFRDA) has introduced instant bank account verification through the penny drop method to ensure timely credit of the amount to the bank account of eligible beneficiary on exit/withdrawal from the NPS account.
According to the regulator, the instance bank account verification through penny drop will protect the interest of subscribers with timely credit of amount. It will also resolve the issue of return of remittances and provide additional due diligence to identify the rightful beneficiary.
PFRDA noted several instances in which the subscribers’ withdrawal amount could not be credited into his Savings Bank Account (SBA) due to several reasons like invalid account number/account type, invalid/wrong IFSC code, name mismatch, account dormant/frozen, account closed, etc.
Because of unsuccessful transactions, the amounts meant for the subscribers remain with Trustee Bank till the correct account number is obtained from them To overcome this problem, PFRDA has asked CRAs to adopt instant bank account verification.
“In order to resolve the issue of return of remittances, to protect the interest of subscribers with timely credit of amount and for additional due diligence to identify the rightful beneficiary, Instant Bank Account Verification by ‘penny drop’ would be adopted by CRAs, by integrating their IT system and exit framework with the Fin-tech service providers,” the regulator said in a circular dated 20th July 2021.
PFRDA further said that through the ‘penny drop’ process, CRAs would check the active status of SBA and match the name in bank account number with the name in PRAN (Permanent Retirement Account Number) or as per the documents submitted.
How will instant bank account verification work?
“The validity of account is verified by making a ‘test transaction’ by penny dropping a specified amount into the beneficiary’s SBA and matching the name based on the penny drop response,” the circular said.
According to the regulator, the penny drop can happen when processing the exit/withdrawal request by a subscriber.
The response of ‘Success’ or ‘Failure’ would be provided by the service provider based on validation of the SBA number name check as per CRA records.
“If the bank account details and other details are not correct, the alternate account number or additional supporting documents are to be submitted for updating the records. In case the penny drop fails at the time of processing, the nodal officer /POP/subscribers will be informed to correct the bank account number and resubmit the application so that their withdrawal request can be processed in a time-bound manner. CRAs may also use the ‘penny drop’ process for registration of entities wherever possible,” PFRDA said.
The regulator also said that CRAs should alert the subscriber not to modify/close the existing bank account once the exit/withdrawal request is captured and till the time it is authorized by the nodal office/POP and amount credited to the account.