The deadline for ending the current relaxed KYC regime for NRIs investing in mutual funds is less than a year away and industry body Association of Mutual Funds in India (AMFI) is actively working towards finding a solution so that such overseas investors can continue investing in the country through mutual funds.
According to people familiar with the development, AMFI, under the guidance of the Securities and Exchange Board of India (Sebi), is exploring alternatives in terms of documents that can used instead of Aadhaar for verification.
“These alternatives could be through various other means such as validating passports or other documents. Sebi has set a one-year timeline to resolve these issues, but the exact methods and timelines for finding alternative validation documents are still being worked out,” said a person directly involved in the process.
Also read: Solving the KYC mess: 5 steps that SEBI has taken to make things easy
This assumes significance because a Sebi directive issued in May 2024 allowed NRIs to invest in new schemes apart from those that they already had even if the registration was not verified. This exemption, however, has been given only till April 30, 2025.
The importance of the issue can also be gauged from the fact that recently Sebi chairperson Madhabi Puri Buch acknowledged the fact that NRIs looking to invest in India through mutual funds are facing challenges.
“We are extremely open to feedback (from AMFI) on finding solutions for these challenges,” said Buch when asked about the issue.
For the KYC to get validated, the KYC Registered Authority needs to verify five things: name as per the PAN card, validated address, Aadhaar linked with PAN, verified email ID and the mobile number.
However, the May 2024 directive by Sebi stated that NRI investors can invest across fund houses even if they do not have Aadhaar.
Monyecontrol had previously reported that Sebi has allowed this exemption because many NRIs had complained that in the absence of Aadhaar, their KYC status was considered as ‘registered’, which meant they were ineligible for investing in a fresh fund house and could do only for those for which validation was completed.
SEBI had also given a one-year relaxation allowing either an investor’s mobile number or email address to be verified, as both were required earlier.
KYC for mutual fund investors has been an ongoing challenge. Earlier this year, it was reported that approximately 1.3 crore mutual fund accounts were currently 'on hold' due to incomplete KYC.
This was because the KYC processes had been completed using documents such as electricity bills, telephone bills, and bank account statements. Later on, as per Sebi's directive, it was noted that these documents were invalid for KYC purposes.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
