AMFI knocks on SEBI doors to resolve the KYC impasse
The Association of Mutual Funds in India (AMFI) has approached the Securities and Exchange Board of India (SEBI) to clear the logjam arising out of validation of investor KYC records.
By an August 11, 2023, circular, SEBI had asked KYC Registration Agencies (KRAs) to validate dierent KYC attributes including PAN-Aadhaar linkage, name, address, mobile number and email ID. Accordingly, from April 1, the KYC status of all investors has been changed to 'KYC Validated’, ‘KYC Registered’ or ‘KYC On Hold’.
CHANGED STATUS
‘KYC Registered’ investors can continue with existing investments but cannot start fresh investments through a dierent asset manager. ‘KYC On Hold’ investors are not allowed to do any transaction — systematic investment plans or redemptions.
SEBI is believed to have asked KRAs to collate data on the number of valid and invalid KYC investors and iron out the chinks in the online KYC updation process.
“SEBI wants the industry to put in more eort to help investors
SEBI wants the MF industry to put in more eort to help investors with a ‘registered’ status to move to the ‘validated’ status conveniently
with a ‘registered’ status to move to the ‘validated’ status conveniently. To that end, it wants the option to modify KYC status to be made available across registrar and transfer agents, KRAs and asset managers,” said an industry ocial.
An email sent to SEBI and AMFI did not get a response.
FLOW DISRUPTIONS
The current impasse is likely to impact flows in April, especially from non-resident Indians and those living in the hinterland with limited access to the Internet or mutual fund point of sales.
For NRIs, the KYC modification can only be done physically, which could be cumbersome as most NRIs do not reside in the country. Resident investors wanting to update their KYC status online
are running into several hurdles such as KRA database error, Aadhaar not eligible for online Aadhaar KYC, KYC with a dierent KRA and OTP not being generated on time.
SIP CONCERNS
Besides, investors are not being intimated by AMCs that their KYC has been put on hold. This is leading to a situation where SIP money is being debited and later refunded to the source account without unit allotment, or redemption requests are being rejected.
Amol Joshi, a distributor, said that new KYC rules should be implemented once KRAs are ready with a common online solution for all investors in one URL. Another distributor feels there needs to be a carve-out given to senior citizens wanting to redeem their money.