Pension regulator PFRDA has made 'penny drop' verification mandatory for the withdrawal of funds by subscribers of the National Pension System (NPS) to ensure the timely transfer of money.
Through the 'penny drop' process, Central Recordkeeping Agencies (CRAs) check the active status of the savings bank account and match the name in the bank account number with the name in PRAN (Permanent Retirement Account Number) or as per the documents submitted.
The provisions will apply across NPS, Atal Pension Yojana (APY) and NPS Lite for all types of exits/withdrawals as well as for modification in subscribers' bank account details.
The validity of the account is verified by making a 'test transaction' by dropping a small amount into the beneficiary's bank account and matching the name based on the penny drop response.
"The penny drop verification has to be necessarily successful with name matching, for processing the exit/withdrawal requests, and also for modifying the subscriber's bank account details," said a recent circular of the Pension Fund Regulatory and Development Authority (PFRDA).
It also said that "no request" for exit/withdrawal, and modification of the subscriber's bank account details will be allowed in case of failure of penny drop verification by the CRA.
In case of penny drop failure, irrespective of the reason, the CRA will take up the matter with the concerned nodal office/intermediary for modification in bank account details of the subscriber through a set process, it said.
"CRA shall send communications to the subscriber on his/her mobile number and e-mail on the penny drop failure and advising him/her to contact his/her nodal officer or POP as the case may be," PFRDA said.
The regulator has asked the CRAs to complete the development of functionality for penny drop verification and required system-level utilities within a month.
There have been instances when the subscribers' withdrawal amount could not be credited to their bank accounts.
In case of unsuccessful transactions, the amounts meant for the subscribers are not credited into the bank account and remain with Trustee Bank till correct details are obtained from the subscriber.