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Business News/ Money / Personal Finance/  What is Mutual Fund KYC?

What is Mutual Fund KYC?

KYC stands for “Know Your Customer” and refers to the process of identifying a customer when he or she opens an account with a financial institution. An investor must be KYC compliant to invest in a mutual fund. Let’s understand this in detail.

KYC refers to the process of identifying a customer whenever he or she opens an account with a financial entity. (HT_PRINT)Premium
KYC refers to the process of identifying a customer whenever he or she opens an account with a financial entity. (HT_PRINT)

With the advent of technology, it has become easier to invest and undertake transactions. Surprisingly this is the same reason why money laundering has become easier than ever before. In order to avoid all illegal activities like money laundering, fraud, etc. background check of the investor is done.

The process of KYC (Know Your Customer) has been made mandatory under the Prevention of Money Laundering Act (2002). The KYC guidelines were first furnished by the Reserve Bank of India and were read together with the master circular which was issued by SEBI.

All major lending institutions, insurance firms, mutual fund companies, investment firms and banks do the background check of their investor or customer.

Know Your Customer (KYC) is another name for this background check. KYC can be done using online or offline mode. The customers are supposed to furnish their identity proofs, address proofs along with their photos and other documents.

Why is it compulsory?

In order to ensure that the investments made are not illegal in nature, it is very important to conduct the KYC process. The process ensures that all those who are investing in the mutual fund provide their real names and original details. These are screened in order to prevent fraud.

All the companies ask for the details before allowing mutual fund investment in order to establish authenticity. This helps the company place its confidence in the customer as it proves that there is no past of defaults.

READ MORE: SIPs score over lump sum investments in the mutual fund industry

How do I get my mutual fund KYC done?

Mutual fund KYC can be done either through the online route or offline route.

Offline Process

Offline KYC can either be done through KYC registration agencies (KRA) or through an intermediary.

KYC with KRA can be done with the help of Central Depository Services Ventures Ltd. (CDSL) which has been authorised by the mutual fund industry to undertake the process of KYC for the investors. It takes care of the record-keeping along with customer profiling for the completion of the KYC process.

The first step is to download the KYC form from the website of CDSL. You are then required to fill in the form with all the required details and attach the necessary documents including identity proof, address proof, photograph and PAN card details.

Once the form is complete, you can submit it to the mutual fund house or the intermediary that you want to invest in. You can submit the form and details by visiting the office of the concerned authority or person.

KYC with an intermediary can be done when an individual plans to invest with a particular investment platform or a fund house. In this case, the house provides him/her with the KYC registration form. The fund house should be registered with a KRA, that is, KYC Registration Agency. Once you submit the form to the house, your KYC will be created after verification from the KRA.

Online Process

Online KYC for mutual funds is nothing different than offline mode. The only difference is that the investor is supposed to submit the details, form and documents online. It is preferred over the offline medium because it is easier and the cumbersome process can be avoided.

You begin by creating an account on the KRA website and then fill in the details. Along with your registered mobile number, PAN card details and photograph, the investor is also supposed to submit copies of self-attested documents.

How do I check my KYC status?

Apart from visiting the fund house and enquiring about your mutual fund KYC status. You can check your KYC status online as well. There are three easy steps to do it:

  1. Visit the KRA website.
  2. Enter your PAN number along with the other details asked.
  3. You will soon be provided with the status of your KYC process.

On a concluding note, the investor should submit all the original details along with valid proof. This shall prevent an individual from landing in trouble. Identity proof like passport, aadhar card, driver’s licence is generally used. For address proof, customers can use electricity bills.

You should always read the rules and guidelines of the KYC process carefully before applying. Also, it must be noted that you can invest only Rs. 50,000 per mutual fund in a year in the case of electronic-KYC.

When a resident wants to get his e-KYC done, he can download the KYC XML.
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When a resident wants to get his e-KYC done, he can download the KYC XML.

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Published: 21 Apr 2022, 05:04 PM IST
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