Moneycontrol Be a Pro
Get App
Last Updated : Nov 07, 2019 05:25 PM IST | Source: Moneycontrol.com

Aadhaar as e-KYC for MFs: Industry gives SEBI move a thumbs-up

"This is a step in the right direction as we had noticed lot of investors discontinuing SIPs after Aadhaar was disallowed to be used as e-KYC," said Narendra Sinha, a Mumbai-based distributor.


Markets regulator SEBI's decision to allow Aadhaar as e-KYC for mutual fund investments will be a shot in the arm for the MF industry as it will reduce time for client onboarding and boost mutual fund penetration, feel experts.


On November 5, SEBI issued a detailed circular regarding the process to be followed for Aadhaar-based electronic KYC exercise for domestic investors.


The circular mentions about the requirements to be fulfilled by entities registered with the UIDAI as KYC User Agency (KUA) as well as for sub-KUA.


"This is a step in the right direction as we had noticed lot of investors discontinuing SIPs after Aadhaar was disallowed to be used as e-KYC," said Narendra Sinha, a Mumbai-based distributor.


SEBI in its last circular had mentioned that Aadhaar-based e-KYC investors can only invest up to Rs 50,000 in a financial year. This time around, SEBI has not made a mention of an upper limit for Aadhar-based KYC investors making investments.


In September 2018, Supreme Court banned the use of Aadhaar data for financial transactions. This means a Permanent Account Number (PAN) is mandatory for every investor KYC.


As per latest data, till July 2018, 1.22 billion Aadhar cards were existing, equal to 90 percent of population.


Aadhaar-based KYC helps reach 90 percent of India like a banking outreach.


Aadhaar becoming a one-stop access to capital markets investment like MF, should ease buisness for rural and small town focussed MFs like Mahindra Mutual Fund and PSU bank-promoted MFs that have large number of small town branches.


"PSU bank mutual funds must gain great subscription as small account holders in small towns are already mapped through Aadhaar to their bank accounts a ready made client base," said a distributor.


Converting these clients to long-term SIP subscribers would depend on how well the bank branches cross sell alongside small town distribution - the plain vanilla diversified equities.


At this stage, initially MFs should not be selling risky sectoral or volatile small cap funds as any downturn will put off the small town investor .


The risky products should be pushed to a later stage.

"In 2006-07, SEBI was first regulator to make PAN mandatory for securities market transactions, now putting Aadhar as E KYC for all without limits, SEBI has achieved 2 targets - ensuring best standards  PMLA compliance and reaching out to smallest investor at end of tail," said a former SEBI DGM who worked in its MF department.



Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.
First Published on Nov 7, 2019 05:19 pm
Loading...
Sections
Follow us on
Available On