The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a significant change, making ‘penny drop’ verification mandatory for subscribers of the National Pension System (NPS) when withdrawing funds. This measure is aimed at ensuring the swift and accurate transfer of money to subscribers. Under the ‘penny drop’ process, Central Recordkeeping Agencies (CRAs) perform a crucial verification step by checking the active status of the savings bank account and cross-referencing the name in the bank account with the name in the Permanent Retirement Account Number (PRAN) or as per the submitted documents.
Wide Applicability:
These provisions will be applicable not only to NPS but also to the Atal Pension Yojana (APY) and NPS Lite, covering all types of exits, withdrawals, and modifications in subscribers’ bank account details.
Importance of Verification:
The account’s validity is confirmed through a ‘test transaction’ where a small amount is transferred into the beneficiary’s bank account, and the name is matched based on the response received from the penny drop process. Successful penny drop verification with name matching is a prerequisite for processing exit/withdrawal requests and modifying the subscriber’s bank account details, as per a recent circular from PFRDA.
No Exception for Failure:
PFRDA explicitly stated that in cases of penny drop verification failure by CRAs, regardless of the reason, no requests for exit/withdrawal or modification of subscriber’s bank account details will be allowed. In such instances, the CRA will collaborate with the relevant nodal office or intermediary to rectify and update the subscriber’s bank account details.
Effective Communication:
To ensure transparency, the PFRDA requires CRAs to establish efficient systems for penny drop verification within one month. In situations where subscribers’ withdrawal amounts could not be credited due to unsuccessful transactions, the funds meant for subscribers remain with the Trustee Bank until the correct details are obtained from the subscriber.
This move by PFRDA aims to enhance the accuracy and efficiency of NPS fund withdrawals while also minimizing potential issues related to erroneous or incomplete bank account details.
