Money & Banking

NPS exits: PFRDA asks CRAs to do ‘Instant Bank Account Verification’

KR Srivats New Delhi | Updated on July 27, 2021

To ensure timely credit of amount and for additional due diligence to identify rightful beneficiary

Pension regulator PFRDA has advised the Central Record Keeping Agency (CRAs) to implement the process of ‘Instant Bank Account Verification’ for the benefit of National Pension System (NPS) subscribers at the time of processing their exit/withdrawal request.

CRAs have been asked to adopt the “penny drop” process that involves crediting the bank account of a beneficiary with a token amount of say ₹1 and matching the name in the bank account numbers with the Permanent Retirement Account Number (PRAN) based on the penny drop response. This will be an enhanced due diligence under the exit/withdrawal process of NPS. For this purpose, CRAs would have to integrate their IT system and exit framework with the fintech service providers, the Pension Fund Regulatory & Development Authority (PFRDA) has said.

Hitherto, the CRAs were asking the banks to verify the account of the beneficiary and then convey their status. This was seen to be a time consuming exercise as the amount will be processed for crediting into the savings bank account (SBA) of the beneficiary only after getting the response from the bank.

Now, as per the new advisory, the verification will be done at end of CRA itself, thereby reducing the time involved for crediting the amount, sources close to the development said.

PFRDA has also now said that the existing charge structure for ‘Instant Bank Account Verification’ should be recovered by CRA from the subscribers for further reimbursement to the service provider.

While in the case of K Fin Technologies, the charge has been pegged at ₹1.90 + tax, the charge specified for NSDL e-Governance Infrastructure at ₹2.40 + tax. These charges include ₹1 credited in the SBA of the beneficiary as part of the penny drop process.

There are instances when the subscribers’ withdrawal amount could not be credited into the SBA of the subscriber due to various valid reasons: invalid account number/account type; invalid/wrong IFSC Code; Name mismatch; account dormant/ frozen; account closed; account does not exist; account is inactive; account is transferred; credit freeze and account type mismatch.

Due to such reasons, it is often seen that the amounts meant for the subscribers could not be credited into the SBA and remain with the Trustee Bank till the correct account number is obtained from the subscriber. To overcome such hurdles, the technology intervention has been adopted in the form of ‘Instant Bank Account Verification’.

The growing NPS 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. This is needed 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 the specified timelines, according to PFRDA.

India’s pension assets under management (AUM) have crossed the ₹6-lakh crore mark and is growing at frenetic pace of over 30 per cent. PFRDA expects to close the current fiscal with an pension AUM of ₹7.5- lakh crore.

Published on July 27, 2021

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