Mutual Funds: New KYC norms for investors take effect from 2024-25; here’s what you need to know

Investors need to update their KYC with Aadhaar to purchase new MF units from 2024-25 under SEBI rules. Checking KYC status with KRAs such as CAMS, Karvy, CVL, and NDML is crucial for continued access to MF investments.

Allirajan Muthusamy
First Published10 May 2024
Mutual fund investors must update their KYC with Aadhaar to buy new MF units from 2024-25 as per SEBI rules effective April 1.
Mutual fund investors must update their KYC with Aadhaar to buy new MF units from 2024-25 as per SEBI rules effective April 1.

Mutual fund (MF) investors who invested before the advent of the now ubiquitous Aadhaar by submitting bank account statements or utility bills as proof of address but have failed to update the 12-digit digital national identity number in their individual folios better watch out.

If you have not submitted information about your Aadhaar, you would not be able to buy new MF units. Investors have to mandatorily get their KYC (Know Your Customer) done through Aadhaar to buy MFs from 2024-25.

Also Read: Mutual Funds: How to check KYC status and what actions you might need to take? A step-by-step guide

With the new set of rules stipulated by markets regulator SEBI on KYC (Know Your Customer) becoming effective from April 1 for MFs, investors have to check the status of their compliance with KRAs (KYC Registration Agencies) such as CAMS (Computer Age Management Services) to continue their investments and redemptions.

“There are a lot of investors who have not done Aadhaar-based verification. Without Aadhaar-based KYC, we cannot process investments in new MF schemes,” says Suresh Sadagopan, managing director and founder, Ladder7 Wealth Managers, a Mumbai-based wealth management firm.

“We have informed all clients about the changes in regulatory requirements. We are asking for the necessary documents from investors in the physical form,” he says. Here is a step-by-step process of how to check the KYC status with KRAs to ensure uninterrupted access to MF investments.

Also Read: 'KYC is a problem crying to be fixed', laments Edelweiss MF's Radhika Gupta

Check your KYC status first

Investors have to check the status of their KYC first. They can do this by logging into the website of KRAs such as CAMS, Karvy, CVL and NDML. The KYC status has been classified under three levels—KYC status is on hold, KYC is validated and KYC is registered or verified. Here are the links to do KYC.

If the KRA says your ‘KYC status is on hold’

This means that all financial transactions, including in existing schemes, will be restricted. The investor has to redo the KYC process by submitting any of the officially valid documents (OVDs) that includes Aadhaar, Passport and Voter ID card to the nearest branch of the AMC (Asset Management Company) or KRA.

KYC is registered or verified

This status implies that you had done your KYC with your Aadhaar card that did not have a QR code, any other OVD or a valid deemed OVD. In this case, you can continue to transact in your existing MF schemes but have to redo the KYC using any of the OVDs to invest in new schemes.

Please do note that if the KYC is done through Aadhaar, there is no need to repeat the KYC process for fresh transactions. If the new KYC is done through non-Aadhaar OVD, investors have to do a fresh KYC verification each time she/he applies for a new scheme.

Also Read: What are the KYC norms for opening a demat account? MintGenie explains

KYC is validated

This means that you have done your KYC using your Aadhaar card. You can continue to invest without any problems in existing and new MF schemes.

What do the new norms mean for NRI investors?

The new KYC norms have made investments in MFs a tough job for NRIs (Non-Resident Indians). They have inadvertently created investment roadblocks for NRIs. Incidentally, NRIs and OCIs (Overseas Citizens) with foreign mobile numbers are exempted from the Aadhaar-linked OTP (one-time password) verification process if their PAN reflects their foreign residential status.

But the new KYC norms mandating compulsory Aadhaar validation has resulted in significant hurdles for the Indian diaspora. Aadhaar authentication often requires OTP verification for which one needs to have an active Indian mobile connection. Many NRIs are not able to update their KYC status as they have only international mobile numbers.

What are the officially valid documents for KYC?

  • Proof of possession of Aadhaar number
  • Passport
  • Driver’s licence
  • Voter Identity Card
  • Job card issued by NREGA and signed by an officer of the state government.
  • Letter issued by the National Population Register containing the details of name/address.
  • Any other document notified by the central government.

Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years. 

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HomeMutual FundsMutual Funds: New KYC norms for investors take effect from 2024-25; here’s what you need to know

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