Pension Fund Regulatory and Development Authority (PFRDA) has recently introduced a “Penny drop” facility for the National Pension System (NPS) in order to ensure that the withdrawal amount is remitted within in the specified timelines in the subscriber’s account.
During the exit owing to reasons like superannuation, premature or due to death or in partial withdrawal from NPS, the Subscribers/nodal offices/POPs (Points of Presence) initiate the withdrawal request by mentioning the required details including the bank account number and IFSC code into which the withdrawal proceeds are to be credited. Once the withdrawal request is verified and authorized in the Central Record Keeping (CRA) system, the proceeds are credited to the subscriber’s/claimant’s bank account as the case may be, through electronic mode by the Trustee Bank.
However, there have been instances when the Subscribers’ withdrawal amount could not be credited into the Savings Bank Account (SBA) of the Subscriber due to any valid due to reasons like Invalid account number/account type, Invalid/Wrong IFSC code, Name mismatch, Account dormant/frozen, Account closed, Account does not exist, Account is inactive, Account is transferred, Credit freeze and Account type mismatch etc. The amounts meant for the subscribers thus is not be credited into the SBA remain with Trustee Bank till the correct account number is obtained from the Subscriber.
How does PFRDA’s Penny drop facility ensure timely credit of NPS withdrawal funds
It is in the above backdrop that that PFRDA has devised a suitable technology intervention viz Instant Bank Account Verification.
In order to resolve the issue of return of remittances and 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.
Through ‘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. 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.
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 ‘penny drop’ process for registration of entities wherever possible.
