NPS withdrawal – Here is how ‘penny drop’ feature works

NPS withdrawal – Here is how ‘penny drop’ feature works
Pension Fund Regulatory and Development Authority (PFRDA), which regulates retirement savings scheme National Pension System (NPS), has introduced a facility to instantly verify bank account of subscribers in order

to ensure timely credit of withdrawal proceeds.

The facility, called penny drop, will check if the bank account details provided by the subscriber exists and is active. This is done by crediting Rs 1 into the bank account of the subscriber.

This decision was taken by the regulator after it was observed that withdrawal amount of many subscribers could not be credited into their savings bank account due to various valid reasons such as invalid account number/account type, invalid/wrong IFSC, name mismatch, account dormant/frozen, account closed/inactive, etc.

“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 PFRDA mentioned in a circular.

The penny drop verification will be done at the time of processing of the exit or withdrawal request made by the subscriber. The response of ‘success’ or ‘failure’ will then be delivered by the service provider based on validation of the savings bank account number, name as per CRA accounts/records.

“Through ‘penny drop’ process, Central Record Keeping Agencies (CRAs) will check the active status of savings bank account (SBA) and match the subscribers’ name in SBA number with the name in PRAN (Permanent Retirement Account Number) 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 pension regulator said in the circular.

The regulator has also allowed CRAs to use the penny drop process for registration of entities, wherever possible.

How will the penny drop method work?

At present, while exiting from the NPS scheme or at the time of making partial withdrawal from the scheme, subscribers or Point of Presence (PoPs) initiate withdrawal requests by mentioning the particulars such as 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.  ReadMore

Source : techiyogiz