Mutual fund KYC puzzle: How to solve it | Simply Save

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Effective April 1, your investments in mutual funds were restricted, depending on your KYC (Know-Your-Customer) status. Overnight, many investors found out that they couldn’t invest across fund houses unless they re-did their KYCs.

The run-up to March 31, 2024 was fraught with confusion for many mutual fund investors. Especially, since many investors found their transactions getting rejected, despite having done their KYCs years ago. The reason: if your KYC was found not to be Aadhaar-based, the new rules call for you to do your KYC yet again, putting Aadhaar as the main address proof.

The matters got compounded on April 30, when another rule was enforced: Your name on your mutual fund application form must match your name as per Income Tax records (PAN) exactly.

Amol Joshi, Founder of PlanRupee Investment Services talks about the hardships that investors are facing, what the different KYC registration statuses are, how to validate KYC and the issues specific to NRI investors.

Here are a few points that Joshi highlighted:

- Before April 1, 2024, mutual fund investors could do their KYC mandate by submitting a bank passbook or bank account statement as the address proof. Some investors also did their KYC through their rent agreement.

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- All these proofs are no longer valid address proofs for mutual fund KYC. Now, investors have to submit an Officially Valid Document (OVD). These OVDs are driving license, passport, Aadhaar and voter ID card.

- By doing fresh KYC via OVDs, investors get KYC-validated or KYC registered. However, if your KYC status is on hold, you would not be able to do any of the mutual fund financial transactions, meaning investors would not be able to do systematic investment plans (SIPs), make lump sum purchases. Even redemption requests would not go through.

- Re-KYC via Aadhaar would be the most beneficial route for investors.

- You will get KYC-Validated status, if the KYC is based on Aadhaar and both mobile number and email ID have been validated by the KRA.

- KYC-Registered is when an investor’s KYC is based on an ID proof other than Aadhaar and both his mobile number and email ID have been validated by the KRA.

- In KYC-Validated, investors can continue with all transactions across all fund houses. While, in KYC-Registered, investors can only continue transacting with existing fund houses that they already have investments with.

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- The issues with re-KYC are likely to have repercussions on mutual fund businesses as there might be an impact on SIP mobilisation numbers for the month of April.

- From April 30, a new rule has kicked in, wherein the name on your mutual fund application should match the name on your PAN, otherwise, your application will be rejected.

- One can either correct or change on their mutual fund application or PAN.