The Pension Fund Regulatory and Development Authority (PFRDA) has announced a new facility for instant verification of bank accounts for enhanced due diligence and to ensure timely credit of National Pension System (NPS) funds after withdrawal by eligible subscribers from the scheme.
The verification of bank account will be done via ‘penny drop’ method. As per this method, Re1 is credited into the bank account of the holder to check whether the bank account mentioned by the subscriber exists and is active.
The decision to introduce instant verification of bank account was taken after it was observed that the subscriber's withdrawal amount could not be credited into their savings bank account due to various valid reasons such as invalid account number, wrong IFSC code, name mismatch, dormant account, account closed, the account does not exist, the account is inactive, the account is transferred, credit freeze account type mismatch, among others.
"Due to unsuccessful transactions for the reasons as mentioned above, the amounts meant for the subscribers could not be credited into the savings bank account remain with trustee bank till the correct account number is obtained from the subscriber. This can be overcome with suitable technology intervention viz Instant Bank Account Verification" the circular issued by the authority said.
The instant verification of bank account can be done at the time of processing of the withdrawal of funds request due to superannuation, premature or death of the subscriber or partial withdrawal request as specified under the scheme.
The pension regulator has also allowed central record-keeping agencies (CRA) to use the penny drop process for registration of entities, wherever possible.
How does the ‘penny drop’ method work?
According to the current process, while exiting (superannuation, premature or due to death) or partial withdrawal from the NPS, subscribers or points of presence (PoPs) initiate withdrawal request by mentioning the required particulars, including the savings bank account number and IFSC code into which the withdrawal proceeds are to be credited.
Once the withdrawal process is confirmed and authorised in the CRA system, proceeds are transferred to the subscriber's savings account electronically by the trustee bank.
According to the PFRDA circular, under the ‘penny drop’ method, CRAs can check the active status of savings bank account of subscribers and match the name in the bank account number with the name in the permanent retirement account number (PRAN) or as per the documents submitted.
The validity of account will be verified by making a 'test transaction' by penny dropping a specified amount into the beneficiary's bank account and matching the name based on the ‘penny drop’ response.
The response of 'success' or 'failure' would be provided by the service provider based on validation of the savings bank account number and 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, subscribers will be informed to rectify bank account number and re-submit the application so that their withdrawal request can be processed in a time-bound manner.
"Through 'penny drop' process, CRAs will check the active status of savings bank account (SBA) and match the subscribers' name in SBA number with the name in PRAN or as per the documents succumbed. 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 PDFRA circular said.
"CRAs may suitably alert the subscriber that he or she should not modify or close the existing bank account once the exit or withdrawal request is captured and till the time it is authorised by the nodal office or PoP and amount credited to the account," the PFRDA circular said.
If the bank account details and other details, as provided by the subscriber, do not match, then an alternate account number or additional supporting documents have to be submitted by the subscriber.
So, if the penny drop fails at the time of processing, the nodal officer or PoP (points of presence) or subscribers will be told to correct the SBA number and again submit the application form/documents so that their withdrawal request can be processed in a timely manner
Charges for penny drop method :
As per the PDRDA circular, a small amount will be recovered from NPS subscribers by the CRAs for the purpose of instant bank account verification.
The charge structure is as follows:
(i) K Fin Technologies Pvt Ltd (KCRA)- Rs1.90+ tax
(ii) NSDL e-governance infrastructure Pvt Ltd (NCRA) - Rs2.40 + tax
The above charges include Re1 credited in the savings bank account of the beneficiary as part of penny drop process, as per the pension regulator’s circular.