NPS Withdrawal: What Happens To Funds Not Credited To Bank Account?

The Pension Fund Regulatory and Development Authority (PFRDA) has expanded the reinvestment rules for National Pension System (NPS) subscribers. Per the latest circular, dated January 23, 2026, the regulatory authority has allowed reinvestment of the returned or pending transaction amount in the permanent retirement account number (PRAN) of the subscribers. Note that PFRDA allows four partial withdrawals before retirement and a full withdrawal at age 60 or retirement, whichever is earlier.

When a subscriber requests the withdrawal, the funds are directly transferred to the subscriber’s account. However, when it cannot be credited due to incorrect or incomplete bank account details, the requested withdrawal funds are reinvested into the concerned subscriber’s PRAN, as per an earlier circular dated February 7, 2023. This pending amount is invested based on the prevailing investment choice and pension fund at the time of exit.

Now, under the latest circular, reinvestment conditions include returned transactions. These are for reasons such as pending exit or withdrawal authorisation. This applies to both NPS and Atal Pension Yojana (APY). The aim is to ensure subscribers don’t lose market-linked return benefits.

When Will The Amount Be Reinvested That Cannot Be Credited?

• When a subscriber’s bank account is closed, dormant, frozen, or if the IFSC is invalid, etc.

• When a subscriber cancels the annuity within the free look-in period cancellation (FLC), and an annuity service provider (ASP) returns the fund.

• When annuity cancellation proceeds are to be returned in case of the old pension scheme or the family pension.

• When the amount is a Tier II withdrawal, a partial withdrawal, or a death withdrawal.

• Amount not credited by central recordkeeping agencies (CRAs) on account of quality monitoring or pending clarification.

• When a dispute or legal matter is ongoing related to withdrawal requests.

If banks' account details are incorrect or incomplete, or in any of these cases, the CRAs will reinvest the amount in subscribers’ PRAN 30 days after the funds are credited in the NPS withdrawal account with NPS Trust.

At the same time, CRAs will communicate and inform the concerned subscribers and nodal offices to submit the required information or documents as necessary. CRAs can communicate using different modes, including SMS, email and so on. Having received no response from the subscribers or nodal offices within 30 days, CRAs will also need to communicate about the reinvestment of funds into the subscribers’ PRANs. In addition to this, CRAs will provide clear and detailed instructions about the process to assist subscribers in claiming the reinvested amount.  

So, if there is a delay in crediting the amount for any reason, such funds will not be kept in transit, but will be reinvested to enjoy market-linked returns.