Is Your Mutual Fund KYC Status ‘On Hold’? Here’s Good News

May 15, 2024 / Reading Time: Approx. 5 mins

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Is Your Mutual Fund KYC Status ‘On Hold’? Here’s Good News

Last week, I covered an article on Mutual Fund KYC, explaining what 'KYC Validated', 'KYC Registered' and 'KYC On-Hold' statuses mean and their impact on your existing and new investments in mutual funds.

To ensure uninterrupted experience when transacting in mutual funds, I stressed having your Mutual Fund KYC status as 'Validated' instead of 'Registered' or 'On-Hold'.

In the case of 'KYC Registered' status (wherein Aadhaar is not used as an officially valid document, but the name in the folio/s matches with PAN and the mobile number along with email ID are verified), while there is no impact on your existing investments in mutual funds, for new investments a fresh set of KYC documents need to be submitted each time.

Speaking about 'KYC On-Hold' status (wherein Aadhaar is not used as an official valid document plus your contact details, i.e. mobile number and email ID, aren't verified), both transacting in existing and new investments in mutual funds is disallowed. This included redeeming money from existing mutual funds schemes as well until a complete re-KYC is done.

Table: KYC Status and Impact on Your Mutual Fund Transactions

KYC Status Existing Investment in MFs New Investments in MFs Action Required
KYC Validated No Impact No Impact None
KYC Registered No Impact A fresh set of KYC documents needs to be submitted every time to invest in mutual funds Do re-KYC using Aadhaar as OVD for KYC status to show "validated"
KYC Hold Transactions may not be allowed Transactions may not be allowed Do re-KYC: ensure contact details are verified and use Aadhaar as OVD to make sure for KYC status shows "validated"

The press release issued by all five KYC Registration Agencies (KRAs) on April 25, 2024 (and reported by the media), stated:

"All KRAs put together hold KYC records of 10.83 crore. Out of which, 73% of KYC records are under 'KYC validated' status, 15% of KYC records under 'KYC Registered' status and balance 12% are under 'KYC On-Hold' status."

On the other hand, according to the Association of Mutual Funds in India (AMFI), the "KYC hold" status is 3% of mutual fund investor accounts. The mutual fund folio count as of April 30, 2024, is 18.15 crore.

The Good News

Now, based on the feedback received from the stakeholders in the securities market and for ease of transacting of investors, for 'KYC On-Hold' status, the capital market regulator, SEBI, has provided some relief.

The regulator is said to have asked the KYC Registration Agencies (KRAs) not to stop redemptions if the KYC status of an investor shows 'On-hold' status due to non-validation of email id and mobile numbers.

Furthermore, another development is that either email id or mobile number would be mandatory, instead of both being required for two-factor authentication as at present.

This move would be particularly helpful for NRIs who may not have an Indian mobile number and do not wish to provide their international mobile number. Also, for very senior citizens who may not have an email id, this change will bring ease.

If the KYC status of an NRI investor is 'Registered' they have been instructed not to insist on a re-KYC.

The exchanges/depositories/concerned intermediaries such as KRAs are directed by the regulator to complete the necessary technical changes in their systems by May 31, 2024, so as to provide relief to investors soon.

Ideally, whether you are a domestic investor or an NRI, to ensure a smooth and hassle-free experience when transacting in mutual funds it is advisable to do a re-KYC in entirety whereby the status shows 'Validated'. Even if there are no changes in the KYC details, it is better to re-do KYC.

The Mutual Fund KYC process can be done online sitting in the comfort of your home, office, or wherever you are in just a few minutes. Having said that, if you find it difficult to do it by yourself, do not hesitate to reach out to your mutual fund distributor or investment advisor.

Happy Investing!

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ROUNAQ NEROY heads the content activity at PersonalFN and is the Chief Editor of PersonalFN’s newsletter, The Daily Wealth Letter.
As the co-editor of premium services, viz. Investment Ideas Note, the Multi-Asset Corner Report, and the Retire Rich Report; Rounaq brings forth potentially the best investment ideas and opportunities to help investors plan for a happy and blissful financial future.
He has also authored and been the voice of PersonalFN’s e-learning course -- which aims at helping investors become their own financial planners. Besides, he actively contributes to a variety of issues of Money Simplified, PersonalFN’s e-guides in the endeavour and passion to educate investors.
He is a post-graduate in commerce (M. Com), with an MBA in Finance, and a gold medallist in Certificate Programme in Capital Market (from BSE Training Institute in association with JBIMS). Rounaq holds over 18+ years of experience in the financial services industry.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. Registration granted by SEBI, Membership of BASL and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.
Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and use such independent advisors as he believes necessary.

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