Why Penny Drop Bank Account Verification is Essential for Secure and Efficient Transactions For any digital lending system or Loan Origination System (LOS), verifying bank account details before processing transactions is crucial.  Penny Drop Verification  has emerged as an efficient solution that ensures accuracy, enhances security, and improves user experience. This article highlights the key benefits of Penny Drop Verification and why businesses should adopt this method for seamless financial operations. What is Penny Drop Bank Account Verification? Simply put, it is a process where lender automatically transfer Re 1 to customer’s bank account as per bank details provided by customer. In return, the lender gets to know if the account is operational and also comes to know the customer name in the bank records. Bank Account Verification in OneFin Customer Journey / Loan Origination System (LOS) Benefits of Penny Drop Bank Account Verification 1. Eliminates Transaction Failures and Errors One of the biggest challenges businesses face while processing payouts or refunds is incorrect bank details.  Penny Drop Verification ensures that the bank account is active and capable of receiving funds , reducing the risk of transaction failures. By verifying the account holder’s name, businesses can avoid costly errors and incorrect transfers. 2. Enhances Fraud Prevention and Security With the increasing threat of identity fraud, validating the authenticity of bank account details is more important than ever. Penny Drop Verification  cross-checks the beneficiary's details with the bank, ensuring that funds are only transferred to legitimate users .  This helps lenders prevent fraudulent transactions and unauthorized payouts. The Name as per bank records must be matched with name as per PAN or Aadhaar i.e the name in the loan account in the Loan Origination System (LOS).  3. Improves Compliance with Regulatory Standards Financial institutions and businesses must comply with  Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations . Penny Drop Verification acts as a compliance tool by ensuring that the bank details provided belong to the actual beneficiary, helping companies stay in line with financial regulations and avoid penalties. 4. Reduces Operational Costs Handling failed transactions and refunds due to incorrect bank details can be expensive.  By verifying accounts upfront, businesses save time and money by avoiding reversals, chargebacks, and manual corrections . Automating this verification process further reduces the need for manual intervention, cutting down administrative overhead. Name Matching Once the name as per bank record is received as part of penny drop verification, it has to be matched with other records. Match bank name with KYC name - match name on the bank account with name as per PAN or Aadhaar based KYC. A name matching threshold can by put to prevent false rejections. A commonly used threshold is around 75%. In case there are co-applicants, the name match should be run against all co-applicants because the bank details could be of an earning member applicant who may not be the main applicant.  While matching name, prefixes like Mr, Mrs, M/S should be stripped off before checking the match %. Otherwise it may reduce the match % even if the names are the same. Conclusion Penny Drop Verification is not just a simple authentication step—it is a  critical component of secure, efficient, and compliant financial transactions . By eliminating errors, preventing fraud, and enhancing the customer experience, this method offers  substantial benefits for lenders . 2️⃣  Industry News Roundup 🗓️ Education finance startup Kuhoo Finance gets NBFC licence [ Reference ] 🗓️ India’s biggest lender SBI to set up AI, fintech project finance unit [ Reference ] 🗓️ MSME Fintech Progcap to empower 10,000 women led MSMEs over the next 3 years [ Reference ] 3️⃣  Stats of the week 📊 Rs 45000 crore+ disbursements were facilitated in H1 of FY25-26 via Account Aggregator framework [ Reference ] Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS, Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . Penny Drop Bank Account Verification | Kuhoo Gets NBFC License & More

1️⃣ Featured Insight -  CERSAI's New CKYC Compliance Rules: Unique IPs, Masked CKYC Numbers & API Changes CERSAI (Central Registry of Securitisation Asse t Reconstruction and Security Interest of India) has been doing a lot of regulatory changes in its process over the last few months. Here is everything you need to know about them: 💡Unique IP requirement Each Reporting Entity (RE) must use a unique IP address for CKYC Search and download API and SFTP access. Ensure that you are using a dedicated IP for accessing CKYC, else your API accesses might have been blocked. Go for solutions which can deploy on your cloud / on-premise services, so that you are able to seamlessly access CKYC services.  💡Masking of CKYC number in search API response Earlier the full unmasked CKYC number was available in the response of the CKYC search API. Now, the CKYC number which comes in the API would be masked, i.e., only the last four digits of the CKYC number of the customer will be available after searching Instead of the unmasked CKYC number, the API would return a CKYC reference number. The CKYC reference number can be passed into the download API to download the KYC documents. If the CKYC download API call is successful, then you will get the full CKYC number as a response. Since CKYC search is free and the download API has a cost, there may be some extra cost implications for the RE. 💡How exactly CKYC Download is different from CKYC search? CKYC download takes two inputs: The CKYC number tag may be used to provide either the CKYC number (14-digit numeric value) or CKYC Reference ID (14- digit alphanumeric value. Authentication factor of either Date of Birth or Pincode & Year of Birth or the mobile number. A fallback mechanism must be created to do a download using all the three options, so that maximum coverage can be achieved. 2️⃣ Industry News Roundup 🗓️ RBI imposes fines to four P2P lending NBFCs. [ Reference ] 🗓️ RBI discourages NBFCs from giving perpetual credit lines to borrowers.Clarifies this is a domain of banks. [ Reference ] 3️⃣ Stats of the week 📊 In the fiscal year 2024, 63% of loans granted to the power sector originated from the three largest Infrastructure Financing Companies, a category of NBFC. This finding was highlighted in the International Monetary Fund's report, "India Financial System Stability Assessment." Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS, Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . #banking #bfsi #fintech #nbfc #los #lms

1️⃣ Featured Insight - Digital Customer Journeys - 5 Best Practices Customer journeys are going digital. However, digital journeys need to be designed properly in order to get the maximum business benefit out of it. Here are 5 best practices when designing digital lending journeys: 💡 Create Mockups Creating a mockup (clickable if possible) is essential to ensure that everyone is on the same page regarding the exact flow of the digital lending journey. You can use tools like  Figma ,  Miro , or the good old  Draw.io . Involve all key stakeholders teams like business, credit, operations, compliance right from the start. Also keep target device in mind - is the journey primarily going to be done on Mobile or Desktop? 💡 Build Cohort based Sub-Journeys One customer journey won't fit all use cases. Better is to design separate sub-journeys for different cohorts e.g. bureau based program, banking program, pre-approved customer base program etc. This will allow you to ensure that journeys are smart and adaptive to the actual business requirements. 💡 Handle Unhappy Flows Many times we end up taking care of happy flows e.g. customer finishes video KYC. But what should the digital system do for the real world scenarios? E.g. customer drops out or enters a wrong identifier? Remember, for every way of doing something correctly, there are more than one ways to do it wrongly. And the system should anticipate and handle for such situations. 💡 Keep Fallback Vendors Wherever you use external vendors, prepare for downtime. When the vendor service is down or it fails, system should automatically switch over to a backup vendor. E.g. PAN verification, bureau pull, SMS etc. If this is not done, a single vendor's downtime can bring your business to a halt. Imagine if that happens on a month-end! 💡   Assisted vs DIY An important aspect to decide is if the journey will be done directly by end customer or in an assisted mode. Assisted mode can make more sense for situations where there is B2B2C setup (e.g. counselor onboarding education loan) or larger ticket size (e.g. business loan onboarding by an RM) or if the journey involves lot of steps. Whereas a journey like personal loan may be better handled by customer directly in a DIY setup. 2️⃣ Industry News Roundup 🗓️  RBI releases list of 15 Upper Layer NBFCs [ Reference ] 🗓️   MobiKwik, Cred join hands with RBI to fully launch CBDC (e₹) for Android; check features, usage [ Reference ] 3️⃣ Stats of the Week 📊 NBFC SME Loans may grow 22-24% in near term. But asset quality headwinds remain. Smaller players may see credit loss of 4-6%: ICRA [ Reference ] 📊  India Fintech Market to Skyrocket, Reaching $769.5 Bn by 2031 [ Reference ] Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS , Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . Banking Technology Insights - Digital Customer Journeys, eRupee for Android & more Linkedin Post - https://www.linkedin.com/pulse/banking-technology-insights-digital-customer-journeys-erupee-idn8c/

1️⃣  Featured Insight - No more GST on penal charges. RBI had instructed all REs to not levy any penal interest for defaulting customers, but to only levy penal charges. This change was initially announced on  18th August 2023 (Circular Attached)  with an implementation timeline of 31st Dec 2023, which was later extended to 1st April 2024 in a  FAQ  issued by the RBI. Now the GST council has clarified in its meeting held on 21st Dec 2024, and notified on  28 Jan 2025 (Circular Attached) . that no GST would be applicable on penal charges, as it is considered a deterrent for payment, and not a payment in itself. Here are 3 things that must be implemented in your LOS and LMS accordingly, to ensure compliance against charges. 💡Change accruals and accounting of penal charges Currently, all accruals of penal charges which would be happening in the system would have been with GST. Suppose accruals were being done at say 24% annualized rate including GST, then excluding GST it must be done at 24 / 1.18 = 20.34% annualized rate. Accounting configurations should be changed to not calculate GST on the charges. Earlier IGST / CGST / SGST split would be happening, now no GST liabilities are to be created while accounting. Since, no GST is payable, no more invoices need to be generated for penal charges. Earlier invoices would have been generated and the same would have been reflected in the GST sales registers. Now penal charges should be removed from the invoice generation process and correspondingly from the GST registers. As per the existing regulations, do not apply compounding on penal charges, meaning, no penal charges no overdue penal charges should be applied. 💡Consider regulations on charging GST on bounce charges The 28 Jan 2025 circular, refers to an earlier GST circular dated  3rd August 2022 (Circular Attached) . In the August 2022 circular, it is mentioned that for “Cheque dishonor fine/ penalty”, no GST should be charged. Consider the above regulation while formulating your policy for GST on bounce charges. As a best practice, only apply bounce charges, when a cheque or NACH dishonour happens due to insufficient funds. It should not be charged when a bounce happens due to insufficient funds. 💡Send out customer communications, update your documents Once the changes are implemented in your LMS , update the same to customers via a one time email and sms campaign. The current sanction letters / loan agreements / KFS would also need to be updated, to reflect that penal charges are not going to include GST. Ensure that vernacular versions of the documents also reflect the same. Since, it is a change in policy and documents, take appropriate approvals within the organization, before affecting the same. 2️⃣  Industry News Roundup 🗓️ Razorpay FTX 2025 event will be held in Bangalore on 20th Feb. You can also join remotely [ Reference ] 🗓️ The role of FinTech in building Viksit Bharat: A Paper by EY with interesting data and insights [ Reference ] 3️⃣  Stats of the week 📊 RBI recently announced that the NBFC UL remains unchanged. NBFC UL accounts for 25.2% of all assets held by all NBFCs. 📊 As of September 2024, total loans and advances given by NBFCs is 42,92,708 crores, compared to 40,27,478 crores as on March 2024, showing an annualized growth rate of 13%, a slow down from 18% growth between March 2023, and March 2024. Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS, Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . Linkedin Post - https://www.linkedin.com/pulse/banking-technology-insights-more-gst-penal-charges-fintech-pclhf

1️⃣  Featured Insight - UCRF Format based bureau reporting now mandatory. RBI has been doing many reforms on the credit reporting space over the last year or so. It has all culminated in the master directions which were released on 6th Jan 2025 [ Reference ]. There have been some sweeping changes in how bureau reporting has to be done. The credit information companies (CICs) have been processing the regulations, and now are asking FIs to submit data in the UCRF (Unified Credit Reporting Format) format only. Below is everything you need to know about it:  💡Learn About UCRF / TUDF format UCRF format is the same as TUDF format. TUDF (Trans Union Data Format) is a text based format (not excel or csv based) developed by CIBIL bureau, with the new RBI guidelines, it is renamed to UCRF format. This change brings consumer bureau reporting in line with respect to the commercial bureau reporting which was already a non excel based text format. Ideal implementation in your systems would be to create a converter from excel to UCRF format, so that any manual edits etc. can be converted to TUDF format. Consumer bureau reporting has to be done every 15 days, on the 15th and the last day of the month, so system development is a must for UCRF format. It is not a human readable format, so it cannot really be created by hand. 💡Commercial Bureau Reporting Co applicants or Relationship Segments are mandatory for doing bureau reporting. [ Reference ]  The Relationship Segment (RS) within the Commercial Bureau format captures data on corporate relationships, including business category and relationship type (e.g. directors, shareholders, proprietors, partners, trustees, holding companies, subsidiary companies and associated companies).  The “tap” format used for commercial bureau reporting is also not a human readable format, so it must be generated by system, as it is not really feasible to generate it by hand. 💡Ensuring Data Quality while doing submissions The new RBI guidelines ask CICs to maintain a Data Quality Index for each FI. It means, a bare minimum reporting is not enough, and each FI should strive to have a high data quality. RBI will monitor the same with respect to the industry wide averages. DQI guidelines are available for consumer bureau reporting  here . They are available for commercial bureau reporting  here . Typically, FIs face problems while maintaining high DQI in commercial bureau reporting, as many fields end up getting reported as “others”. The best way to handle this is to ensure that all fields which are considered in DQI must be taken as inputs. 2️⃣  Industry News Roundup 🗓️ Kinara Capital breaches loan covenants. [ Reference ] 🗓️ RBI released draft circular on charging of foreclosures charges. These are some borrower friendly norms which will impact how foreclosure charges are charged to customers by banks and NBFCs. [ Reference ] 3️⃣  Stats of the week 📊Bank lending to NBFCs saw a significant slowdown in 2024, increasing by only 6.7% to reach Rs 16.22 lakh crore as of December. This is a marked contrast to the 15% growth rate observed in 2023, and represents the slowest growth rate in four years. 📊 The Reserve Bank of India's quarterly data revealed that the annual growth rate for the personal loan segment decreased to 13.7% at the end of December 2024, compared to 15.2% at the end of September. This moderation in personal loan growth during the quarter ending in December followed regulatory cautions about potential overheating in the market. Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS , Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . #banking #bfsi #fintech #nbfc #los #lms #loanmanagementsystem

1️⃣ Featured Insight -  Audit Trails in LOS & LMS Systems Implementing robust audit trails within Loan Origination Systems (LOS) and Loan Management Systems (LMS) is crucial for ensuring transparency, accountability, and regulatory compliance in India's lending sector. An audit trail meticulously records every transaction and modification, detailing who made changes, what information was altered, when it occurred, and the previous values. This comprehensive tracking not only deters malpractices but also aids in identifying the root causes of discrepancies, thereby enhancing the integrity of financial operations. Significance of Audit Trails in LOS and LMS 💡Enhancing Transparency and Accountability Audit trails provide a chronological record of all activities within LOS and LMS platforms. By documenting user actions, these trails ensure that every modification is traceable to an individual, fostering a culture of accountability. This transparency is vital for maintaining trust among stakeholders, including customers, regulators, and financial institutions. 💡Deterrence of Fraudulent Activities  The presence of an immutable audit trail acts as a deterrent to potential fraudulent activities. When individuals are aware that their actions are being recorded and can be scrutinized, they are less likely to engage in unethical behavior. This preventive measure is essential in safeguarding the institution's assets and reputation. 💡Facilitating Root Cause Analysis  In instances where discrepancies arise, such as mismatches between reports, audit trails enable swift identification of the underlying issues. For example, if two reports differ, the audit trail can reveal whether data was altered between the generation of these reports, allowing for prompt corrective actions. Regulatory Framework and RBI Guidelines The Reserve Bank of India (RBI) has underscored the importance of audit trails in digital lending platforms to enhance data security and borrower protection. According to the RBI's digital lending guidelines, data collection by digital lending applications should be need-based, have clear audit trails, and be conducted only with the prior explicit consent of the borrower. Furthermore, the Ministry of Corporate Affairs in India has mandated that, effective from April 1, 2023, all companies must implement software that records an audit trail for every transaction. This includes creating an edit log for each change made in electronically maintained books of account, capturing the date of such modifications. The audit trail must always be enabled and should not be tampered with, ensuring the integrity and reliability of financial records. Best Practices for Implementing Audit Trails in LOS and LMS for Banks & NBFCs Comprehensive Data Recording Ensure that the audit trail captures all pertinent details of each transaction, including user identification, timestamps, nature of changes, and previous and new values. This comprehensive data collection is vital for accurate monitoring and analysis. Real-Time Monitoring and Alerts Implement real-time monitoring systems that can promptly detect unauthorized or suspicious activities. Automated alerts should be configured to notify administrators of potential security breaches or policy violations, enabling swift responses to mitigate risks. Secure and Tamper-Proof Storage Store audit logs in a secure, tamper-proof environment to prevent unauthorized access or alterations. Utilizing encryption and access controls ensures that only authorized personnel can view or manage these logs, maintaining their integrity. Regular Audits and Reviews Conduct periodic audits of the audit trails to verify compliance with internal policies and regulatory requirements. Regular reviews help identify patterns or anomalies that may indicate fraudulent activities or system inefficiencies. User Training and Awareness Educate employees about the significance of audit trails and the institution's commitment to monitoring all activities. Awareness programs can deter malicious actions and promote adherence to ethical standards and procedures. Integration with Compliance Management Systems Integrate audit trail functionalities with broader compliance management systems to ensure seamless adherence to regulatory standards. This integration facilitates automated reporting and simplifies the compliance verification process. Challenges and Considerations Data Volume and Management The extensive data generated by audit trails can be overwhelming, necessitating efficient data management strategies. Implementing scalable storage solutions and data analytics tools can help manage and interpret large volumes of audit data effectively. Performance Impact Continuous logging of activities may impact system performance. Optimizing system architecture and employing efficient logging mechanisms are essential to balance performance with comprehensive monitoring. Privacy Concerns While audit trails enhance security, they must be designed to respect user privacy. Collecting only necessary data and ensuring compliance with data protection laws are crucial to maintain trust and avoid legal repercussions. Cost Implications Implementing and maintaining robust audit trail systems can be resource intensive. However, the benefits of enhanced security, compliance, and operational efficiency often outweigh these costs, making it a worthwhile investment. Conclusion Incorporating comprehensive audit trails into Loan Origination and Loan Management Systems is imperative for fostering a secure, transparent, and compliant lending environment in India. By adhering to regulatory guidelines and implementing best practices, financial institutions can not only protect themselves against fraud and operational inefficiencies but also build trust with borrowers and regulators alike. As the digital lending landscape continues to evolve, the significance of robust audit trails will only become more pronounced, serving as a cornerstone of integrity and accountability in financial operations. 2️⃣ Industry News Roundup 🗓️ Google building digital agri stack for India using satellite data. This will facilitate subsidy payments, agriculture loans & more [ Reference ] 🗓️ ET BFSI CIO Conclave will happen on 7th March at Sahara Star, Mumbai [ Reference ] ▶️The Bold Journey Of Mobikwik, India's Fintech Pioneers -  Watch Video 3️⃣ Stats of the week 📊 Treasure Trove on Data related to Indian Economy - Indus Valley Report by Blume.  This annual report by reputed Blume Ventures has gone viral.  It does a deep data driven analysis on all important aspects related to Indian economy, including startups, innovation, SME IPOs & much more [ Reference ] Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS, Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . #banking #bfsi #fintech #nbfc #los #lms

1️⃣ Featured Insight - Banking Technology Insights - Self-Serve Customer Portal for Banks & NBFCs  Does a bank or an NBFC need to give a Self-Serve login portal for its customers? It is strongly recommended to do the same, even if the customer set is sourced under a B2B2C or partnership model. Here are 5 advantages of providing a Self-Serve login portal to customers: ✅ Automatically handle routine customer queries - many customer queries like need for SOA, access loan documents, request loan closure letter, information on amount payable etc can be provided in the self-serve portal. This will reduce amount of time your team spends on routine customer support ✅ Keep KYC updated - as per RBI guidelines, regulated entities need to keep KYC details like address updated periodically. The self-serve portal can serve as a way to periodically update information. Customer can be asked if their details have changed, and if so, their KYC update can be done on the portal. There can be a duration after which re-KYC is mandated by the system. ✅ Grievance management - the portal can also serve as a way for customer to raise a grievance request. This can link to your backend CRM or LMS for resolution of the grievance in an auditable manner. Details of customer support or RM can also be provided inside the customer portal. ✅ Payment options - you can also provide option to customers to make payment directly in the portal. ✅ Legacy customers management - there may be legacy loans that may have been sourced by a business correspondent, or it may correspond to a portfolio that you bought over. The portal can help customers of these loans also remain in touch with you. 2️⃣ Industry News Roundup 🗓️   Indian Bank and IIT-M to hold cybersecurity, fintech hackathon in April. The upcoming hackathon will center on critical issues in the FinTech sector and advanced fraud detection mechanisms within the cybersecurity domain. [ Reference ] 🗓️ RBI allows small finance banks to offer credit lines via UPI. Until now, UPI transactions were limited to savings accounts, overdrafts, prepaid wallets, and credit cards. With this update, individuals can also link pre-approved credit lines as a payment source. [ Reference , RBI Reference ] 🗓️  RBI to launch ' bank.in ' and ' fin.in ' domains for Banks & NBFCs respectively. This will help consumers identify which bank / NBFC website is legitimate and which is fake. [ Reference ] 3️⃣ Fintech Article of the Week 📊  Use of Generative AI in Credit Assessment - An Insightful Article by CRISIL. Generative artificial intelligence (GenAI) is disrupting business-as-usual worldwide. Read this article to see how it may affect the credit assessment processes followed by lenders.  [ Reference ] Want to get weekly content regarding new developments in banking technology? Subscribe to our newsletter  here . Are you a CXO at a bank / NBFC / fintech company interested in upgrading your technology? We would love to show you a demo of the OneFin offering. We provide end to end capabilities including configurable modules like LOS, LMS, Accounting System, Collection System, Digital Journeys etc. Schedule a Demo  here . #banking #bfsi #fintech #nbfc #los #lms #loanmanagementsystem