Introduction: The Pension Fund Regulatory and Development Authority (PFRDA) has issued a crucial circular regarding enhanced due diligence for National Pension System (NPS) withdrawals. This circular aims to strengthen the verification process for bank accounts, ensuring the rightful beneficiaries receive their funds promptly and securely.
Detailed Analysis: The key points from the PFRDA Circular are as follows:
1. Penny Drop Verification: The circular emphasizes the necessity of successful penny drop verification, with name matching, for processing exit and withdrawal requests. It applies across sectors, including NPS, Atal Pension Yojana (APY), and NPS Lite, for all types of withdrawals and modifications to subscribers’ bank account details.
2. Resolution for Penny Drop Failure: In case of penny drop failure, regardless of the reason, the Circular mandates the Central Recordkeeping Agency (CRA) to work with the concerned nodal office or intermediary to update the subscriber’s bank account details through the appropriate process.
3. Communication to Subscribers: CRAs are required to notify subscribers of penny drop failures through mobile and email. Subscribers are advised to contact their nodal officer or Point of Presence (POP) and update their bank account details. The nodal offices and POPs are also informed to update the details in the CRA system, enabling the processing of exit/withdrawal requests.
4. Government Sector Processing: For government sector subscribers, the circular specifies that withdrawal request proceeds must be credited to the salary bank account of the subscriber.
5. Enhanced Due Diligence: CRAs are tasked with conducting proper verification and enhanced due diligence checks before executing exit and withdrawal requests where there was a previous penny drop verification failure.
6. Implementation Deadline: CRAs are given 30 days from the circular’s issuance date to complete the development of the required functionality and system-level utilities.
Conclusion: The PFRDA Circular highlights the importance of enhancing due diligence in the NPS withdrawal process through mandatory penny drop verification. This measure ensures that subscribers receive their funds promptly and securely, while also safeguarding against potential discrepancies in bank account details. The circular underscores PFRDA’s commitment to subscriber protection and a seamless withdrawal experience.
In a rapidly evolving digital landscape, such initiatives are vital to maintain the integrity of financial systems and protect the interests of pension fund subscribers. As stakeholders and CRAs adapt to these changes, the NPS withdrawal process is set to become more secure and efficient, ultimately benefiting all participants.
The PFRDA’s proactive approach in addressing these issues and setting a clear timeline for implementation reflects its commitment to ensuring the NPS continues to be a reliable and secure investment option for all subscribers. By embracing these enhancements, stakeholders can look forward to a more streamlined and secure NPS withdrawal process.
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Pension Fund Regulatory and Development Authority
Circular no: PFRDA/2023/29/Sup-CRA/09 Dated: 25th October 2023
To
All NPS Stakeholders and Central Recordkeeping Agencies
Subject: Mandatory Penny drop verification – Instant Bank Account Verification for Enhanced Due Diligence w.r.t. Exit / Withdrawal requests and for modifying the subscriber’s bank account details
Reference is invited to the Circular no PFRDA/2021/21/SUP-NPST/2 dated 20th July 2021 on the subject Instant Bank Account Verification for enhanced due diligence under the Exit/Withdrawal process of NPS. Copy of the circular enclosed for ready reference.
2. Para 7 of the said Circular has been modified as under:
The penny drop verification has to be necessarily successful with name matching, for processing the Exit / Withdrawal requests, and also for modifying the subscriber’s bank account details. No request for Exit / Withdrawal, and or for modifying the subscriber’s bank account details shall be allowed in case of failure of penny drop verification by the CRA. The above-stated provision shall be applicable across sectors i.e. NPS, APY and NPS Lite for all types of Exits/withdrawals as well as for modification in subscribers’ bank account details.
3. In case of penny drop failure (irrespective of the reason), the same shall be taken up by the CRA with the concerned nodal office/intermediary for modification in bank account details in the subscriber account through set process and after following the proper due diligence.
4. CRA shall send communications to the subscriber on his/her mobile number and e-mail on the penny drop failure and advising him/her to contact his/her nodal officer or POP as the case may be. Simultaneously, the CRA has to send communication to the concerned nodal office or POP intimating about the failure of penny drop verification. The nodal offices and POPs are to be advised to update the details in the CRA system through S2 form or as per the set process, post which the processing of the exit/withdrawal can be taken up including re-verification of the bank account through penny drop verification.
The withdrawal request proceeds are to be credited to the salary bank account of the subscriber in case of Govt Sector, as it has been stipulated vide Circular No. PFRDA/2015/27/EXIT/2 dated 12th November 2015.
5. CRA shall before execution of any Exit / withdrawal requests where there has been a failure of penny drop verification earlier, do proper verification through proper flagging mechanism in the CRA system and enhanced due diligence checks.
6. The enhanced due diligence advised above is to be effected immediately. CRAs must complete the development of said functionality & required system-level utilities within a period of 30 days from the date of issuance of this Circular.
Yours sincerely,
Chief General Manager
Cir. No. PFRDA/2021/21/SUP-NPST/2
July 20, 2021
To
All Stake holders under NPS
Subject: Instant Bank Account Verification for enhanced due diligence under the Exit/Withdrawal process of NPS
Growing Subscribers’ base, geographically wide spread service providers and the large-scale adoption of digital interventions necessitate the importance of verifying the beneficiary’s bank account number of the Subscribers independently not only to ensure that the amount is received by the rightful beneficiary whose Bank Account is active but also to ensure that amount is remitted within in the specified timelines.
2. During the exit (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.
3. There are instances when the Subscribers’ withdrawal amount could not be credited into the Savings Bank Account (SBA) of the Subscriber due to any valid reasons as mentioned below.
(i) Invalid account number/account type
(ii) Invalid/Wrong IFSC code
(iii) Name mismatch
(iv) Account dormant/frozen
(v) Account closed
(vi) Account does not exist
(vii)Account is inactive.
(viii) Account is transferred.
(ix) Credit freeze.
(x) Account type mismatch etc
4. Due to unsuccessful transactions for the reasons as mentioned above, the amounts meant for the Subscribers could not be credited into the SBA 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.
5. 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.
6. 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.
7. The ‘penny drop’ can happen at the time of processing of the Exit/Withdrawal request. 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 ‘penny drop’ process for registration of entities wherever possible.
8. CRAs may suitably alert the Subscriber that he/she should not 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.
9. The existing charge structure for Instant Bank Acct verification which shall be recovered by CRAs from the Subscribers for further reimbursement to the service provider is as follows.
(i) K Fin Technologies Pvt Ltd (KCRA)- Rs. 1.90+ tax
(ii) NSDL e-Governance infrastructure Pvt Ltd (NCRA) – Rs. 2.40 + tax
The above charges include Re 1 credited in the SBA of the beneficiary as part of penny drop process.
10. CRAs are advised to implement the process of ‘Instant Bank Account Verification for the benefit of subscribers and as part of additional due diligence to verify the beneficiary.
This circular is issued under Section 14 of PFRDA Act 2013 and is available at PFRDA’s website (www.pfrda.org.in) under the Regulatory framework in “Circular” section.
Yours sincerely
(K. Mohan Gandhi)
Chief General Manager
k.mohangandhi@pfrda.org.in
Cir. No. PFRDA/2021/21/SUP-NPST/2
July 20, 2021
To
All Stake holders under NPS
Subject: Instant Bank Account Verification for enhanced due diligence under the Exit/Withdrawal process of NPS
Growing Subscribers’ base, geographically wide spread service providers and the large-scale adoption of digital interventions necessitate the importance of verifying the beneficiary’s bank account number of the Subscribers independently not only to ensure that the amount is received by the rightful beneficiary whose Bank Account is active but also to ensure that amount is remitted within in the specified timelines.
2. During the exit (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.
3. There are instances when the Subscribers’ withdrawal amount could not be credited into the Savings Bank Account (SBA) of the Subscriber due to any valid reasons as mentioned below.
(i) Invalid account number/account type
(ii) Invalid/Wrong IFSC code
(iii) Name mismatch
(iv) Account dormant/frozen
(v) Account closed
(vi) Account does not exist
(vii)Account is inactive.
(viii) Account is transferred.
(ix) Credit freeze.
(x) Account type mismatch etc
4. Due to unsuccessful transactions for the reasons as mentioned above, the amounts meant for the Subscribers could not be credited into the SBA 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.
5. 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.
6. 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.
7. The ‘penny drop’ can happen at the time of processing of the Exit/Withdrawal request. 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 ‘penny drop’ process for registration of entities wherever possible.
8. CRAs may suitably alert the Subscriber that he/she should not 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.
9. The existing charge structure for Instant Bank Acct verification which shall be recovered by CRAs from the Subscribers for further reimbursement to the service provider is as follows.
(i) K Fin Technologies Pvt Ltd (KCRA)- Rs. 1.90+ tax
(ii) NSDL e-Governance infrastructure Pvt Ltd (NCRA) – Rs. 2.40 + tax
The above charges include Re 1 credited in the SBA of the beneficiary as part of penny drop process.
10. CRAs are advised to implement the process of ‘Instant Bank Account Verification for the benefit of subscribers and as part of additional due diligence to verify the beneficiary.
This circular is issued under Section 14 of PFRDA Act 2013 and is available at PFRDA’s website (www.pfrda.org.in) under the Regulatory framework in “Circular” section.
Yours sincerely
(K. Mohan Gandhi)
Chief General Manager
k.mohangandhi@pfrda.org.in
