The pension regulator PFRDA has introduced instant bank account verification through the penny drop feature to help NPS subscribers and protect their interest for timely credit of the amount upon withdrawal. Penny drop is used for checking bank accounts and would be adopted by central record keeping agencies (CRAs). Once the withdrawal request has been verified and authorized in the CRS system, the product is then credited to the subscriber’s bank account.
That said, when an NPS subscriber makes a withdrawal request mentioning the required details such as bank account number and IFSC code etc. for the proceeds of the withdrawal, the amount is sometimes not credited. In some cases, due to account issues like invalid / wrong account number, account type, wrong IFSC code, name mismatch, dormant or frozen account etc. the amount withdrawn from subscribers is not credited to the savings bank account. This is when the installation of the “penny drop” comes into play.
NPS withdrawal: Re 1 “penny drop” feature
Penny drop is used for bank account verification which will help investors as NPS authorities will verify the bank account first and then initiate the withdrawal request.
Harshad Chetanwala, co-founder of MyWealthGrowth.com, said: âBy using the penny deposit feature, delays in receiving the withdrawal from the NPS at the end of investors will be avoided. There have been issues like invalid bank account or credit failure of withdrawal amount due to incorrect bank details. Penny drop will credit Re 1 to investors’ bank account, verify bank details and then credit the withdrawal amount.
The response “Pass” or “Fail” after the one-cent deposit function would be given by the service provider based on the validation of the savings account number as per CRA records. If the bank account details are or other details are not correct, another account number or additional supporting documents must be submitted for updating of records.
How to operate the NPS as an investment vehicle?
Industry experts say the NPS can work as an additional instrument along with other investment options to build one’s retirement corpus. NPSs give an individual the ability to invest in stocks, government bonds, and corporate bonds when these funds are managed by fund managers at a very low cost. This gives investors of different age groups options to consider the NPS.
Having said that, Chetanwala says, âNPS is blocked until the age of 60 and it only allows withdrawal 3 times throughout the tenure, which impacts the liquidity of the investor. Therefore, one can use the NPS with other retirement investment options.
Recent changes in NPS plans to help subscribers
There has been little change in NPS plans recently to help subscribers, with some important ones such as allowing full withdrawal from NPS if the accumulated balance in one’s pension account is up to Rs 5 lakhs and partial withdrawals. can be done by NPS investors on their own. -declaration where the subscriber does not need to provide any supporting documents.