What is Penny Drop Facility, how does it work? Important for NPS Subscribers, What is Penny Drop Facility, How does it work? Important for NPS Subscribers

What is Penny Drop Facility, how does it work? Important for NPS Subscribers, What is Penny Drop Facility, How does it work? Important for NPS Subscribers

What is Penny Drop Facility, how does it work?  Important for NPS Subscribers

Penny drop process provides many facilities to NPS customers.&nbsp

Headlines

  • PFRDA has introduced new facility.
  • This allows instant verification of customers’ bank accounts.

Penny Drop Facility : The Pension Fund Regulator and Development Authority (PFRDA) has introduced the facility to verify the bank account of customers instantly to ensure timely credit for the withdrawal process. PFRDA regulates the retirement savings scheme National Pension System (NPS). The facility called Penny Drop will check whether the bank account details provided by the customer are present and active. This is done by depositing Re 1 in the customer’s bank account. This facility is known as penny drop. This customer provided bank account details are present and active.

The decision was taken by the regulator after observing that the withdrawal amount of several customers was diverted due to several valid reasons like invalid account number or account type, invalid or wrong IFSC, mismatched name, prej or dormant account, closed or dormant account. Savings bank account could not be deposited.

Due to unsuccessful transactions due to the above reasons, the amount earmarked for the Subscribers cannot be credited to the Savings Bank Account unless the correct Account Number is received from the Subscriber. This can be overcome with suitable technical intervention or immediate bank account verification.

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Penny drop verification will be done at the time of processing the exit or withdrawal request made by the customer. The ‘Success’ or ‘Failure’ response will then be given by the Service Provider based on verification of the name as per the Savings Bank Account Number, CRA Accounts/Records.

The Central Record Keeping Agencies (CRAs) will check the active status of the Savings Bank Account (SBA) through the ‘Penny Drop’ process and match the name of the customer in the SBA number with the name of the PRAN (Permanent Retirement Account Number). The pension regulator said in the circular that the validity of the account is verified by doing a ‘test transaction’ by entering a certain amount in the SBA of the beneficiary and matching the name based on the penny drop response. The regulator has permitted CRAs to use penny drop process for registration of entities wherever possible.

How will the penny drop method work?

Currently, at the time of exit from the NPS scheme or at the time of partial withdrawal from the scheme, the customer or the Point of Presence (POP) initiates the withdrawal request by mentioning the details like savings bank account number and IFSC code in which the withdrawal takes place. Once the withdrawal process is confirmed and authorized in the CRA system, the proceeds are electronically transferred to the customer’s savings account by the Trustee Bank.

Before making the transfer, the account validity will be verified by doing a ‘Test Transaction’ by putting a specified amount (usually Re 1 ) in the beneficiary’s bank account and matching the name based on the penny drop response. If the penny drop fails at the time of processing, the customers will be informed to correct the bank account number and resubmit the application so that their withdrawal request can be processed in a time bound manner.

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What is the Penny Drop Verification Charge?

As per the PFRDA circular, a small amount will be recovered from the NPS customers by the CRA for the purpose of instant bank account verification. The charge structure is as follows:-

K Fin Technologies Private Limited (KCRA) – Rs 1.90 + Tax

NSDL e-Governance Infrastructure Private Limited (NCRA) – Rs 2.40 + Tax

This amount was credited to the savings bank account of the beneficiary as part of the penny drop process along with Re.1.

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