With only two days left for the earlier March 31, 2024, re-KYC deadline to end, mutual fund (MF) investors have been granted some relief.
MF investors no longer need to re-do the KYC (know your customer) for their existing MF folios (or investments). That is, they can continue to conduct transactions such as systematic investment plan (SIPs), systematic withdrawal plans (SWPs), or redemptions in their existing folios. This is as per a communication sent by CDSL Ventures, one of the KYC registration agencies, to mutual fund distributors (MFDs) on March 28, 2024.
KYC is how an entity such as a bank, fund house, stock broker, etc., verifies an investor’s identity.
Relief for existing investors
Earlier, failure to do the KYC would have blocked investors from conducting any MF transactions from April 1, 2024, if the original KYC had not been based on any of the ‘officially valid documents.’ This was communicated to MFDs via emails sent by registrar and transfer agents (RTAs) — CAMS (Computer Age Management Services) and KFin Technologies — around the first week of March. The last date for re-KYC was March 31, 2024.
As per these emails, officially valid documents include the Aadhaar card, passport, and voter ID card, among others. Bank statements and utility bills are no longer deemed valid for KYC purposes.
While existing investors do not have to re-do their KYC, they must still validate their mobile number / email ID per the KYC records. If that is not done, then the investor’s KYC will be put ‘on hold’ with effect from April 1, 2024, as per the latest CDSL Ventures communication.
To validate these details, investors can enter their PAN and other information here . Upon submission, they will either get a message indicating that their details have been verified, or they will get an OTP to complete the process.
Explaining the logic for mobile / email ID validation, Viral Bhatt, an MFD and founder of Money Mantra, says that this is being done to check that the contact details provided by an investor are his own and not that of an intermediary through whom he has been investing.
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KYC for new investors and folios
Note that if you are a new MF investor, you must do your KYC based on one of the officially valid documents as specified by the RTAs.
But what happens if you are an existing MF investor making a new investment? Amol Joshi, an MFD and Founder of PlanRupee Investment Services says, “If an existing MF investor wants to make any investment in his existing folios, he doesn’t require a re-KYC based on any of the officially valid documents. But, if he opens a new folio, he will have to re-do his KYC by submitting a physical KYC form along with one of the officially valid documents.”
Bhatt confirms this. He says that per his understanding, existing investors don’t have to re-do the KYC for their existing folios, but for new folios, KYC will have to be based on an officially valid document.
“More clarity is needed on this matter. AMFI (Association of Mutual Funds in India) can provide that. In fact, there’s a lack of clarity when it comes to any communication from the RTAs or KRAs (KYC Registration Agency),” he adds.
A folio number is a unique identification number that is assigned to you when you first invest with any fund house. This helps identify / track your investment. For any subsequent investments with that fund house, you can choose to invest under the same folio or under a new folio (which is like having one or more accounts with the same bank).
All the communication relating to the matter of re-KYC has been between RTAs or KRAs, and MFDs. That means, those investing in mutual funds via MFDs (in regular plans) would be kept in the loop on this issue.
But it leaves out those investing in MFs on their own, that is, direct plan investors. Most people we spoke with were unable to confirm if any emails / SMSs on re-KYC were sent to investors.
