It’s not what it looks like. The capital market regulator, Securities and Exchange Board of India (Sebi), still mandates that mutual fund (MF) investors should be compliant with the know-your-client (KYC) norms. But what do you do if you are not KYC-compliant but still want to invest in an MF rightaway because, say, the markets have fallen and you don’t want to miss this opportunity? Ordinarily, it takes about a fortnight to get your KYC done. Must you wait till then? Not really. Here’s an alternative: apply for an MF investment and your KYC at the same time.
One of the prerequisites to investing in an MF is your KYC acknowledgement. Visit www.cvlindia.com and click on “inquiry on KYC”. A small window will pop up on your screen that will ask for your permanent account number (PAN) card. Fill it up and submit. If your KYC is approved, you will get a notification on the screen saying so. You need to take a printout for proof. However, you can only get this acknowledgement if your KYC is already done. If your KYC is not done, it’s best not to postpone your investments. Just fill in your KYC and your MF application forms at the same time while investing. While your fund house allots you units within two to three days, depending on the type you invest in, your KYC will take about 10 days to come. However, you can’t sell your units in the meantime even if you wish to. The reason being your fund house allows you to invest in an MF pending your KYC is a special facility given to you with an assurance that you will eventually get your KYC done. If you invest today and withdraw, say, tomorrow—while your KYC is still in process—you are deemed to have invested without KYC; a contravention of Sebi guidelines.
Road map for KYC
Effective January 2011, you need to get your KYC done, irrespective of your investment amount. But that was not always the case. Effective December 2004, a PAN card was made compulsory for all investments of Rs 50,000 and above. In July 2007, PAN card was made compulsory for all investment amounts. Effective 1 January 2008, KYC was made compulsory for all investments of Rs 50,000 and above. From this year onwards, KYC is mandatory for all. Since PAN card is one of the mandatory documents required to get your KYC, you no longer need to show your PAN card separately at the time of investment.
Micro systematic investment plan (SIP) is exempted
Micro SIP investors are spared of doing their KYC. As per Sebi guidelines, if you invest in a micro SIP, all you need to submit is either your driving licence, voter identification card, photo ration card or a few other notified documents. Make sure these documents are self-attested; the investor’s signature must be there on such documents. A micro SIP is one where your annual SIP instalments—in a continuous period of 12 months or in a financial year—does not exceed Rs 50,000.