Colombo-based non-resident Indian (NRI), K Sathish, had been investing in mutual funds for the past seven years. But after he shifted to Sri Lanka, he is no longer a resident Indian and his systematic investment plan (SIP) transactions have been blocked. His bank account needs to be converted to a Non-Resident External (NRE) account, which would require customer documentation and verification, again. A change of KYC is required and a video KYC would have helped. But that’s a problem since he now lives abroad.
Amid the raging pandemic, the Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI) have permitted the facility of verifying the know-your-customer documentation through video calls (video KYC). In May, the RBI allowed bank customers to update their KYCs through video KYC. It also expanded the video KYC’s scope. But such a video KYC is not available outside the Indian territory.
Need for capturing physical presence
N S Venkatesh, Chief Executive, Association of Mutual Funds in India, says, “Both RBI & SEBI guidelines have mandated that the live location of the customer (Geotagging) shall be captured to ensure that customer is physically present in India. Hence, e-KYC, along with video-based in-person verification is available only to a customer who is physically present in India.”
Several small and large distributors in the country have been facing issues in making investments for KYC non-compliant NRIs who have not been able to travel due to coronavirus.
“We are not able to complete the KYC for NRI customers because they cannot travel and hence cannot make investments. Video KYC is allowed by SEBI, but only for customers located in India,” says Anand Dalmia, Co-founder, Fisdom.
The technology firms that have been assisting banks, demat account providers for video KYC interface, too, say that on-boarding of NRIs has been a challenge for them. “Unfortunately, the AADHAAR portal does not support logins from outside India. So, technically, we can't carry out the video KYC for NRIs as the system blocks the user based on the guidelines. The location is captured under KYC primarily due to the anti-money laundering rules,” says Praveen Paulose, MD & CEO at Celusion Technologies.
Bank mergers have complicated KYCs
Due to bank mergers, redemptions from mutual funds too can’t be deposited in the bank account. Your IFSC code and account number also may change. So, need to submit a fresh bank mandate. Here again, NRIs suffer as they can’t visit bank branches personally.
From July 1, 2021, Allahabad Bank, Oriental Bank of Commerce, Syndicate Bank, Andhra Bank and Corporation Bank have merged into Indian Bank, Punjab National Bank, Canara Bank and Union Bank of India respectively. The bank account numbers and IFSC codes of these bank customers have changed. This makes it worse for NRIs living abroad.
So, those bank customers, who have SIP registrations from these banks would have to submit a “Change of bank mandate.” Only then would redemption proceeds hit your bank account.
Paul D Souza of Cuzzins Investment Services, says, “When the IFSC code and MICR code of the bank change, the SIP has to be re-logged in. For NRIs, the process is a tad difficult as they need to sign the documents and request for a fresh bank mandate, which would require at least 10-15 days to be executed.”
“Some mutual fund investors had to collect physical cheques and later deposit it in the functional bank account,” says certified financial planner Pankaaj Malde.
A senior CAMS official says that an easy mechanism for change of bank mandate, is on its way. “The current digital ‘Change of bank’ option provided by CAMS, needs the investors to upload the old and the new cheque leaves. There is also an AUM limit in the folio, for risk reasons. CAMS is designing a fully digital ‘change of bank’ option soon and will roll out the same for investor convenience.”
So, check with your bank if the online change of bank mandate has been facilitated.
Is video KYC from abroad possible?
Venkatesh of AMFI say that regulators should intervene with appropriate safeguards to make KYC and on-boarding of clients – NRIs or domestic – simpler. Additionally, those who already submitted documents once, should be permitted to make minor updations without the KYC suggest distributors dealing with NRIs.
“Change of Bank and Change of other personal details should be made as easy as online transaction and KYC, without the requirement of physical documents and proofs. Bank account holders should not have to go through another KYC,” suggests Dalmia.
Due to the lack of AADHAAR portal’s access abroad, several NRIs have missed the pandemic-led rally. A possible solution is needed through regulatory and Government intervention.