Any bank, lending institution, investment platform, mutual fund company, insurance firm—basically any company that provides financial services needs to do a background check on its customers. This is mainly done to prevent money laundering, fraud, and criminal activities. KYC is another name for such background checks.
For mutual funds too, certain KYC norms have been formulated by the regulatory authorities. Investors can complete an online KYC for mutual funds or choose the offline route.
SEBI has recently announced a few changes and circulated some new regulations to redo the KYC. Let’s explore the details here.
As per the latest SEBI regulation, if you had done the original KYC based on your Aadhar Card, no re-KYC is needed for you. But, all Mutual Fund investors are required to re-do their KYC by March 31, 2024, if it had initially not been done on the basis of an ‘officially valid document’ (OVD) such as a passport, Driving license, voter ID card etc
Previously, many investors used to submit their utility bills as address proof. However, now the norms for KYC have been revised and the documents required for KYC have been modified. So, if your original KYC was based on an OVD except Aadhar Card, your existing investments won’t get affected but to invest in a new fund house, you would have to redo your KYC.
In short, if KYC was done by passport, driving license, or voter ID, your existing investments, redemption, etc., won't get blocked. However, if the KYC was done by utility bills, it might be blocked. Therefore, redoing KYC is essential before April 1, 2024.
To check whether you have to redo your KYC or not, first, you have to check your KYC Status.
To check your KYC status, you can do any of the following-
Here are the details about types of KYC Status-
|
KYC Status |
Condition |
Impact on Investment |
Requirement for Redo of KYC |
|
Validated |
Your original KYC was based on Aadhaar. Also, your Mobile and email have been validated by KRA |
Can continue investing in and redeeming funds |
No |
|
Registered |
|
There won’t be any impact on existing investments. But you won’t be able to invest in a new fund house |
|
|
On Hold |
Original KYC was based on a non-OVD Or Your mobile or email ID are not valid |
You will get debarred from all mutual fund transactions |
Yes |
|
Rejected |
The status will become ‘Rejected’ if your KYC has been on hold for 10-15 days |
You will get debarred from all mutual fund transactions |
Yes |
1) The Aadhar Card is the most essential document for re-doing KYC.
If the original KYC was not based on your Aadhar Card, then you have 2 options-
2) You can use only officially valid documents (OVDs) such as Aadhar Card, Passport, voter ID, MREGA Card, etc
Remember, utility bills and bank statements are disallowed to be used for KYC going forward.
You can redo KYC either online or offline. Here are the steps required-
You would have to submit a KYC form and a physical copy of your Aadhar Card to the respective fund house you invest with.
Note, if the QR code present on the Aadhar Card is not readable, KYC validation will not be successful.
Note that if your KYC status is ‘Registered’, you can go ahead and continue with your existing mutual fund houses. But note you cannot invest with a new mutual fund house until you have completed re-doing your KYC.
If your status shows as ‘Validated’, your investment will go through easily. However, you will be required to redo your KYC with Aadhar.