PFRDA issues a circular for Instant Bank Account Verification for enhanced due diligence under the Exit/Withdrawal process of NPS

Jul 23, 2021 | by Avantis RegTech Legal Research Team

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Secretarial Compliance

The Pension Fund Regulatory and Development Authority of India (PFRDA) on July 20, 2021 has issued a circular for Instant Bank Account Verification for enhanced due diligence under the Exit/Withdrawal process of NPS

This 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.

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, through electronic mode by the Trustee Bank.              

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.

a)       Invalid account number/account type

b)      Invalid/Wrong IFSC code

c)       Name mismatch

d)      Account dormant/frozen

e)      Account does not exist

f)        Account is inactive.

g)       Account is transferred.

h)      Credit freeze.

i)        Account type mismatch etc

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.

 Further, 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

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.

The ‘penny drop’ can happen at the time of processing of the Exit/Withdrawal request.

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.

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



Above charges include Re 1 credited in the SBA of the beneficiary as part of penny drop process.


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