In a major boost to the mutual fund industry, the Securities and Exchange Board of India (Sebi) revived Aadhaar-based eKYC for mutual funds through a notification on 5 November. Unlike the previous version of eKYC, which had a limit of investment up to ₹50,000, the regulator did not specify any upper monetary limit in its latest notification. As per the notification, SEBI-registered mutual fund distributors and advisors will be able to complete the eKYC process by registering themselves with a KYC user agency (KUA) as a sub-KUA. The KUA would in turn be registered with Unique Identification Authority of India (UIDAI). Only resident Indians will be eligible for the eKYC process.
As per the notification, SEBI-registered mutual fund distributors or other intermediaries can complete Aadhaar-based eKYC by directing the user to the website of the KUA. Once the users details are authenticated using a One-Time Password (OTP), the intermediary would display the authenticated details to the user and ask him or her to complete any additional details required by the KYC rules. In another variant, the investor will be able to complete the KYC on a registered or whitelisted device operated by the intermediary using biometric details.Under the new notification, the intermediary would not be allowed to store the Aadhar number of the user.
The move can pave the way for a major expansion of the mutual fund industry. At present there are only around 2 crore mutual fund investors, less than 2% of India’s population. “This looks like a major game changer for mutual fund intermediaries and the industry as a whole. It will make investing accessible to a large base of investors across India. It is not yet clear how difficult the process of registering as a sub KUA would be, but I’m sure these details will be released soon," said Lalit Keshre, CEO of online mutual fund platform Groww.