Invest Smart | Everything you need to know about new KYC rules for mutual fund accounts

The KYC registration entities recently revealed that around 1.3 crore mutual fund accounts have been put 'on hold' due to incomplete KYC. As per capital market regulator SEBI's orders, investors with an 'on hold' KYC status will not be able to carry out any transactions in mutual funds, from April 01. Additionally, a new regulation implemented on April 30th mandates that the name on a mutual fund application must match the name on the PAN card, or else the application will be rejected.

In this episode of Invest Smart, Amol Joshi, Founder - PlanRupee Investments explains the new KYC rules and how investors can go about doing their re-KYC if their accounts have been put on hold.

KYC - key aspects

Joshi explains that the changes in KYC rules, introduced by the Securities and Exchange Board of India (SEBI) several months ago, focus on five key aspects:

1. The validity of the PAN
2. Linking the PAN with Aadhaar
3. Name consistency across documents
4. Verification of mobile numbers and email IDs via OTP (One Time Password)
5. The implementation of Aadhaar-based KYC is emphasized as the most advantageous method,

As per Joshi, this grants investors a validated status, which streamlines transactions across various fund houses.

Impact of KYC status which is 'On Hold'

Regarding the impact of a KYC hold, Joshi warns that ongoing Systematic Investment Plans (SIPs), lump sum investments, and redemption of existing mutual funds will all be affected. He emphasizes the urgency for investors to complete their KYC through any of the officially valid documents to resume transactions seamlessly.

Addressing concerns about the timeframe for rectifying KYC holds, Joshi clarifies that there is no specific deadline but advises investors not to delay the process as until this is done, all transactions will be impacted. Both online and offline options are available for completing KYC, though online platforms may encounter technical glitches, causing inconvenience to users.

Moreover, non-resident Indian (NRI) investors face additional challenges due to limitations in obtaining Aadhaar, making the KYC process potentially more cumbersome for them.

The recent KYC amendments underscore the importance of regulatory compliance and vigilance in the investment landscape, urging investors to stay informed and proactive in navigating these changes.

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