The Securities and Exchange Board of India has eased some restrictions that relate to the know-your-customer norms for investments into mutual funds. These relate to the linkage of the permanent account number and Aadhaar, according to a circular issued on Tuesday.
The market regulator's master circular governing KYC norms came into effect at the start of the new financial year, giving mutual fund investors a status based on the documents they used to complete KYC.
KYC Status
Individuals who had not validated their mobile number or email, or failed to link their PAN and Aadhaar or had some other deficiencies in the documents they had submitted, were classified as 'on hold'. Such investors are currently unable to transact at all.
Investors who had used a document other than the Aadhaar for verification have been classified as 'registered'. These investors can continue to transact in mutual funds they had already invested in but can't create new folios. That is, they are unable to invest in mutual fund schemes they are currently not invested in.
And finally, those that have validated their KYC using Aadhaar are classified as 'KYC validated' and can transact normally.
In a recent conference call, the Association of Mutual Funds in India clarified that 93% of the investors were either 'validated' or 'registered', while 3% were 'on hold'.
The Change
In its circular on Tuesday, the market regulator clarified that investors who have not linked their PAN and Aadhaar will no longer be categorised as 'KYC On Hold'. Instead, if that is the only discrepancy in their KYC, they will be categorised as 'KYC Registered'.
"With this, individuals who have not yet linked their PAN and Aadhaar will be able to transact in the mutual funds they're currently invested in," said Amol Joshi, founder of PlanRupee Investment Services.
In order to be validated, however, the investors will still have to complete the linkage of their PAN and Aadhaar, he said.
How To Get Validated If You're Registered?
While there are multiple ways for investors to have their status changed to 'KYC Validated', one of the easiest ways to do this is to go onto the website of a mutual fund they are currently invested in and update KYC using Aadhaar. This is normally possible by following a 'modify KYC' link, Joshi said.
Attempting to make a fresh investment on the website of a mutual fund by filling out a fresh KYC application would also work, he said.
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