National Pension System update: PFRDA introduces new rules for bank account verification process

The Pension Fund Regulatory and Development Authority (PFRDA) has recently introduced a much easier way of bank account verification and name-PAN matching process using the National Payments Corporation of India (NPCI) Framework. Under the new framework, PRAN-PAN-VPA(UPI) would be linked through NPCI, which means a complete end-to-end digital process.

The PFRDA in a circular said: “As part of Azadi Ka Amrit Mahotsav (AKAM) and to commemorate 75 years of India's Independence, PFRDA is pleased to introduce an advanced mode of Bank Acct Verification of the Subscribers (PAN-PRAN- VPA (UPI)) with elegant features where the joint holder details, PAN and UPI Ids are verified through NPCI and matched with Permanent Retirement Acct Number (PRAN)."

How will the linking happen?

At present, the PAN-PRAN-VPA (UPI) feature is offered by CAMS CRA for the associated NPS subscribers. The nodal pension regulator has encouraged all CRAs and other intermediaries to integrate the digital journey of subscribers with emerging technology like PAN-PRAN- VPA (UPI) verification provided by NPCI.

NPS subscribers’ PAN and bank account number details along with IFSC will be sent to NPCI to check if the account number is linked with PAN in the bank.

If the account number and PAN are linked to the bank then NPCI will provide the return response as Y along with the account holder’s name in the bank. It will also return the UPI ID, account type, and status of the bank account.

In case the account number and PAN are not linked in the bank, then NPCI will provide the return response as N.

“As this process returns the value in binary (active/inactive), it is more powerful than the penny-drop process which is dependent on fuzzy logic of name matching,” said PFRDA.

Currently, Mutual Funds, Insurance Industry, and NBFCs are extensively using the facility for onboarding and change of Bank mandates. This facility is also used by Mutual Funds to verify third-party investments.

Advantages of using PAN-PRAN- VPA (UPI) framework 

1. Error elimination in payout process 
2. Binary & Simplified NPCI's response viz active/inactive simplifies the due diligence process vis a vis the earlier penny-drop framework which is dependent on the fuzzy logic of name matching. 
3. Matching of PAN seeded in PRAN and bank account 
4. Successful and timely processing of withdrawal requests of a subscriber who is the joint holder in a bank account.

How will NPS subscribers benefit 

a. Fast and prompt response.

b. Works even when the subscriber is the second or third holder of the account.

c. Eliminating issues arising out of longer names as the penny-drop process sometimes returns incomplete / curtailed names.

d. Easier and more logical approach than penny-drop which uses fuzzy logic of name matching.