The market regulator Securities and Exchange Board of India (SEBI) has come up with a new KYC procedure for mutual fund investors in its notification released on 5 November 2019. This decision is regarded as a significant advance and would benefit the industry considerably.
The earlier variants of eKYC were limited to investments under Rs 50,000. The market watchdog has not specified any such restriction for the new eKYC procedure. As per the new procedure, the SEBI-registered mutual fund advisors and distributors can register as sub-KUAs with KYC user agencies (KUAs) to complete the eKYC process.
The KYC user agencies are registered with the Unique Identification Authority of India (UIDAI). Mutual fund intermediaries and distributors can direct the users to the KUA websites to complete their eKYC process. The SEBI has mentioned that only resident Indians can undergo the new eKYC process.
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The users are needed to authenticate their KYC details through a one-time password (OTP). Once the user confirms the details, the intermediary will display the details, and the users are further asked to furnish other information which is needed under the KYC rules.
The users can complete their eKYC process in another way. The KYC users can complete their KYC with a registered device by an intermediary with their biometric details. However, the intermediaries and distributors are not allowed to have the Aadhaar numbers of investors.
The SEBI’s move is capable of paying a way for the expansion and growth of the mutual fund industry. Currently, only two crore Indians are involved in mutual funds, which is less than 2% of the Indian population. The SEBI is coming up with innovative ways of encouraging people to invest in mutual funds.
The new eKYC process can be revolutionary in terms of attracting investors. It has made the KYC procedure much simpler and faster, this is certain to benefit the mutual fund distributors and advisors. The new process has made investments more reachable to individuals in India.
The SEBI’s notification has not mentioned about any steps or procedures to be followed in order to register as sub-KUAs. It is unclear as to how complex the procedure is going to be. Mutual fund advisors and distributors are awaiting the release of these details soon.
For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in
Engineer by qualification, financial writer by choice. I am always open to learning new things.
