Many mutual fund investors found themselves grappling with KYC (Know Your Customer) issues prior to March 31st. The predicament stemmed from certain conditions not met by investors, prompting them to undergo KYC procedures again.
Failure to comply risked blocking their transactions starting April 1st. While the mutual fund industry intervened to ease the conditions, concerns regarding KYC persist. Let’s delve into the crux of this ongoing matter.
Understanding KYC
KYC entails the verification of an investor’s identity by entities like banks, mutual funds, and brokerage firms before initiating transactions.
Previously, all investors were mandated to undergo KYC again by March 31st. Those who hadn’t utilized officially recognized documents such as Aadhaar, Passport, or Voter ID were required to recomplete their KYC.
Changes in KYC Procedure
Traditionally, investors often submitted copies of utility bills like electricity or telephone bills for address verification. However, recent KYC regulations specify acceptable documents.
Investors who previously completed KYC using non-official documents face the prospect of repeating the process.
Failure to comply risks transaction blocks, as per communications from CAMS and KFin Technologies to mutual fund distributors in early March.
Concessions Granted to Investors
According to industry sources, SEBI data indicates that KYC for 73.5 lakh mutual fund investors, or unique PAN numbers, relied on non-officially verified documents.
Some leniency has been extended to existing investors. Provided they continue investing through SEBI-registered intermediaries, they need not undergo KYC again. However, there’s a caveat to this arrangement.
Sole Reliance on Official Documents for KYC
A spokesperson from a fund house disclosed that investors must complete KYC afresh to transact with new fund houses.
This necessitates basing KYC on Aadhaar or other officially recognized documents each time they engage with a new fund house, reinforcing Aadhaar-based KYC as the most robust authentication method.
