PFRDA enforces 'Penny Drop' verification to streamline NPS fund withdrawals

The Pension Fund Regulatory and Development Authority (PFRDA) has introduced a mandatory 'penny drop' verification process for National Pension System (NPS) subscribers when they request fund withdrawals. This step aims to ensure the efficient and timely transfer of funds.

During the 'penny drop' procedure, Central Recordkeeping Agencies (CRAs) assess the active status of the savings bank account and confirm whether the name in the bank account matches the name in the Permanent Retirement Account Number (PRAN) or the provided documents.

These regulations apply to all NPS, Atal Pension Yojana (APY), and NPS Lite subscribers for various types of exits, withdrawals, and changes to bank account details. Successful 'penny drop' verification with name matching is a prerequisite for processing exit/withdrawal requests and making changes to a subscriber's bank account details, as stated in a recent circular from PFRDA.

If 'penny drop' verification fails for any reason, PFRDA prohibits requests for exit/withdrawal or modification of a subscriber's bank account details. In the event of such a failure, CRAs will work with the relevant nodal office or intermediary to rectify the bank account details through a defined process.

PFRDA mandates that CRAs must promptly inform subscribers of 'penny drop' failures through mobile messages and emails, instructing them to contact their nodal officer or Point of Presence (POP) as needed.

The regulator has set a deadline of one month for CRAs to develop the necessary functionality for 'penny drop' verification and related system-level tools.

This move is intended to address situations where subscribers' withdrawal funds could not be successfully deposited into their bank accounts. In cases of unsuccessful transactions, the funds intended for subscribers remain with the Trustee Bank until the correct account details are provided by the subscriber.

(With PTI Inputs)