The Pension Fund Regulatory and Development Authority (PFRDA) has made the decision to allow intermediaries to use technological intervention by using the Video Based Customer Identification Process (VCIP) as an additional layer of due diligence when processing withdrawal claims in the event that NPS subscribers demise. 

 

According to a PFRDA circular dated January 4, 2023, “In line with the technological advancements and for ensuring seamless exit claim processing, it has been decided to allow the intermediaries to use technological intervention by using VCIP as an added due diligence mechanism for verification of the nominee/claimant/legal heir while processing the withdrawal claims in case of death of NPS subscribers”.

 

PFRDA, via a circular dated October 6, 2020, had given intermediaries permission to use the Video Based Customer Identification Process (VCIP) for any NPS-related services, including onboarding and exit.

According to the recent PFRDA circular, intermediaries have recommended that VCIP be used to expedite the processing of withdrawal claims in favour of nominees/claimants/legal heirs owing to the untimely death of NPS subscribers.

 

How nominee's credentials can be verified

 

VCIP supports the intermediaries' current due diligence efforts by enhancing the process security in terms of verifying that the nominee/claimant/legal heir is the same person who provides the paperwork for processing the claim and by maintaining a video record of the transaction. Aadhaar e-KYC or DigiLocker can be used to confirm the nominee's credentials.

 

According to the latest circular, “the process is optional for use by the intermediaries. However, PFRDA advises PoPs, especially Online PoPs to use the emerging technology for enhanced due diligence and error free/ timely processing of claims. NPS Trust may also use the above process while processing e-NPS death claims.”

 

The circular stated “All the intermediaries are hereby informed to use Instant Bank Account Verification through penny drop for the purpose of verifying claimants’ bank account information as part of claim processing which allows independent verification of Bank Account and name matching”.

 

In order to prevent the intermediaries from being burdened further by the introduction of this facility, the intermediaries who, in addition to being registered with PFRDA, are also registered with other financial sector regulators are allowed to follow the VCIP guidelines issued by those regulators for carrying out for NPS-related activities as well. However, as stated in the release dated October 2020, the intermediates who are fully registered with and under the authority of PFRDA would abide by the guidelines established by PFRDA for carrying out VCIP.