NPS offers subscribers a choice of two record keeping agencies

Last year, the Pension Fund Regulatory and Development Authority (PFRDA) selected Karvy Computershare Pvt. Ltd as the second central record keeping agency (CRA) for the National Pension System. The first CRA is NSDL e-Governance Infrastructure Ltd, which has been functioning as the CRA since 2007 when NPS was opened for the government sector. It later opened to the private sector in 2009.

In a recent circular, dated 3 January, PFRDA stated that Karvy was in advanced stages of CRA system development, which is likely to become operational soon. The circular also mentioned the CRA charges by Karvy. Once operational, the two CRAs would be NCRA (NSDL-CRA) and KCRA (Karvy-CRA). According to an email response from PFRDA, the idea of a second CRA is to bring in competition to improve efficiency and pricing. NPS subscribers can now choose between two CRAs. We take you through the roles of a CRA and the charges you may have to pay.

What is a CRA?

In the architecture of NPS, CRAs have a pivotal role. Other than being a repository of data, they are also responsible for administration and customer service functions, and act as operational interface between the different entities of NPS, such as the pension fund managers, trustee banks and points of presence (PoP) who distribute NPS.

So when you open your account, either online or through a PoP, the CRA captures your data and issues you a Permanent Retirement Account Number (PRAN). Your contributions go to the trustee bank and it’s the CRA’s job to tell the bank about your chosen pension fund manager, and also to tell the pension fund manager where to invest your money. “Pension fund managers don’t have data of the subscribers or their choice of funds. When the trustee bank apportions money as per customer choice, the CRA communicates to the pension fund manager which fund to invest the money in,” said Sumit Shukla, chief executive officer, HDFC Pension Management Co. Ltd. “Nobody except the CRA has complete details of the customers and therefore it is responsible for the coordination and the customer service,” he added.

Charges

CRA services come at a cost. Unlike the pension fund management charge or the PoP charges, which are a percentage of the contribution you make, CRA charges are fixed. There are three cost heads under which the CRA charges: one-time account opening fee, annual maintenance cost and charge per transaction.

The one-time fee by NCRA is currently Rs50, whereas the annual maintenance charge is Rs190. The per transaction charge is Rs4.

KCRA costs much less. The account opening charge is Rs39.36 whereas the annual charge is Rs57.63 and transaction charge is Rs3.36.

According to PFRDA, NCRA has an option to reduce the charges and the authority expects the charges to come down due to the competition from the new CRA.

So should the CRA costs matter? “Reducing the CRA charges through market competition doesn’t benefit the subscribers significantly, as it’s a tiny sum. But this leads to multiplicity of processes that may be unnecessary for a young product like the NPS,” said Manoj Nagpal, chief executive officer, Outlook Asia Capital. “Even in terms of customer service the scope is limited as it is the PoPs that interact with the customers whereas the CRAs work the back-end,” he added.

Existing as well as new subscribers will be able to choose between the two record keeping agencies. “The subscriber would be given an option to shift from one CRA to the other once in a financial year. There will be data migration from one CRA to the other. The required inter-shifting forms and processes are in finalisation stage,” said the email response from PFRDA.