Explained: Why Signzy is doing 'penny drop' verification of NPS subscribers

Penny Drop Verification is a process used to confirm the validity of a bank account

Signzy, a technology-based solution provider for financial institutions, is conducting penny drop verification for over 60 million subscribers of the National Pension System (NPS). But what does this mean?

Penny Drop verification is:

— A method to validate bank account details

— Involves a small deposit, usually Re 1, to confirm account activity and ownership

— Ensures correct and accurate payment transfers

It is a process used to confirm the validity of a bank account. It involves making a small transaction, usually Re 1, to verify the account details. This step is crucial for ensuring that the account is genuine and active, preventing issues in payment transfers for both businesses and vendors. Moreover, it helps verify that the provided account details belong to the correct individual or entity.

Why is Signzy conducting Penny Drop Verification for NPS subscribers?

This verification process is being implemented following directives from Protean eGov Technologies, previously known as NSDL eGovernance. The initiative is based on a circular issued by the Pension Fund Regulatory and Development Authority (PFRDA) on October 25, 2023, which made penny drop verification mandatory for all NPS subscribers.

The primary aim is to ensure the timely transfer of funds by confirming the active status of subscribers' bank accounts. The process involves Central Recordkeeping Agencies (CRAs) checking whether the name on the bank account matches the one associated with the PRAN (Permanent Retirement Account Number) or the documents submitted. This verification is applicable across the NPS, the Atal Pension Yojana (APY), and NPS Lite for all types of exits, withdrawals, and modifications of bank account details.

How will Penny Drop verification be conducted?

As part of the verification process, each NPS account holder will receive a credit of Re 1.01 from Signzy. This amount, along with any associated charges and taxes, will later be deducted from the subscriber’s PRAN by the CRA.

In a press release, Signzy highlighted the common challenges faced by subscribers, such as invalid account numbers, incorrect account types, and name mismatches. The company aims to overcome these issues, ensuring that funds are accurately and promptly credited to verified account holders.

Suresh Sethi, Managing Director & CEO at Protean eGov Technologies, said, "Through Signzy, we will ensure that money is credited to verified account holders within the specified timeline."

What is NPS?

The NPS is a voluntary, long-term investment scheme for retirement under the purview of the PFRDA and the Central Government of India. It encourages individuals to invest in a pension account at regular intervals during their working years. Upon retirement, subscribers can withdraw a portion of the accumulated corpus, with the remainder providing a monthly pension. This system is designed to provide financial security and stability to individuals in their post-retirement years.