Paytm Money migrates MF investors to broking business

One of India’s largest direct mutual fund (MF) platforms, Paytm Money, has started migrating customers to its broking business.

Paytm Money, which was launched in September 2018 and crossed 6.6 million users in 2020, had in an email to customers on 4 July asked them to comply with additional Know Your Customer (KYC) norms as part of the platform’s shift to the services of BSE StAR, a MF transaction platform. This shift entails users getting a unique client code (UCC) and a demat account. Users need to complete the additional KYC steps by 25 July or will be barred from making fresh investments through the platform.

The move is likely to help Paytm Money cross-sell intra-day trading, besides futures and options as well as delivery-based trades to its MF customers. Currently, Paytm Money charges brokerage of 0.01% on every executed order involving delivery of shares, and a minimum of 0.05% of turnover, or ₹10, on intraday trades. The firm levies a minimum of 0.02% of turnover, or ₹10, per executed order on intraday and carry forwarded trades in equity futures, and ₹10 per executed order in options. As in the past, Paytm Money will not charge investors for their MF transactions.

Demat accounts

As per the company’s communication, the failure of its customers to migrate to a demat account by 25 July will mean that their future investments in MFs, including via SIPs (systematic investment plans), and redemptions will be stopped until the KYC process is completed.

Any action related to past MF investments after 25 July will have to be initiated on the website of the AMC (asset management company). Customers will still be able to access their portfolios and view the status of their investments. To complete the migration to a demat account, users also have to upload an image of their signature on a blank paper, besides a photo (clicked via the Paytm Money app). The entire process can be completed online and may not take more than a few minutes.

“Paytm Money has since its inception been executing direct MF transactions for lakhs of retail investors with our RIA (Registered Investment Advisor) code and using our own technology platform. We are migrating to a new platform and our transactions will use our broking code instead of RIA Code. To ensure continuity of investors‘ savings plan, all investors are required as per regulations to have a UCC code. Consequently, they are required to update their KYC and complete the application form for a demat account,” said Varun Sridhar, CEO, Paytm Money.

“We have waived all charges and fees for this demat account as long as clients are investing only in mutual funds. Further, the MF units will continue to be in statement of account (SoA) form and not in demat form. Only if investors transact in equity will they be charged as per the current equity tariff, which anyway is very competitive. Fresh mutual fund investments will be in the direct plan," said Sridhar.

“Post the launch of the migration process, many clients have already completed their demat account opening and KYC to the BSE StAR MF platform. We are extremely grateful to these investors who appreciated our transparency and recognized our efforts in helping them gain 1% higher returns by investing in Direct Mutual Funds compared to Regular Mutual Funds. We continue our path to achieve financial inclusion and build India’s most loved wealth management platform,” he added.

What your options are

If you want to keep using Paytm Money for MFs, you will have to complete the KYC and migrate to the broking side of Paytm Money. The company has assured users that there will be no charges for MF investors in this process.

Yet, customers are under no obligation to migrate to the broking business. They can continue to make fresh investments, redemptions and SIPs directly from the websites of the AMCs concerned. The firm has also allowed customers to place redemption requests on its platform before 25 July, which will be processed in three trading days. Do note that this can trigger an exit load and have tax implications.