Investing in the money market is probably one of the best ways to turn your wealth into a truly high-performing asset that increases your net worth over time through the power of compounding. The equity market may be the de facto choice for investors looking for investments that outperform inflation no matter what their level of experience or risk appetite.
However, when it comes to taking a balanced approach towards investing, with room for both security and opportunity, mutual funds fit the bill perfectly. The key concept of mutual funds is the trade in diversified holdings. Such funds invest the shareholder’s money across a wide segment of investment instruments – shares, debt securities, money market instruments or a heterogeneous combination of the three. Since the investor’s money is invested across a large cross section of the market, the investor’s risks are minimized.
What is e-KYC?
One of the most important USPs of mutual funds is that these are managed professionally by individuals who directly communicate and interact with the client. When it comes to financial institutions directly dealing with customers or for that matter, protecting themselves against being misused, intentionally or unintentionally, for illegal activities, having in-depth knowledge of their customers is a key requirement as per current government regulations.
KYC or Know Your Customer is a term that refers to a set of norms introduced by the RBI bank in 2002. These norms directed financial intuitions (including investment firms) to introduce policy- based measures that allow them to know key information such as name, address, age, etc. of their customers before opening an account. Since its introduction, this policy and process has evolved over time and has expanded in scope. Currently, when you decide to go ahead and invest in mutual funds, you will need to file the necessary KYC paperwork with the relevant authorities. Earlier the entire process was paper-based, wherein, you had to mail the hardcopies of all your documents to the relevant authorities. However, most financial institutions have gone ahead and digitised the entire process, allowing investors to submit scanned copies of their documents online.
As of January 1st 2012, investors from every category need to comply with KYC norms in order to carry out mutual fund transactions, irrespective of the investment amount. KYC compliance is granted by one of the KYC Registration Agencies (KRA):
- CVL (CSDL Ventures Limited)
- NSE (National Stock Exchange)
- NSDL (National Securities Depository Limited)
- CAMS (Computer Age Management Services) and
- KARVY KRA
Once you have prepared and submitted your e-KYC application, you can check its status online by referring to the websites of any of the KYC Registration Agencies. You’ll just need to enter your PAN card number to retrieve the current status.
Investors who need to be KYC complaint includes:
- Individual and non-individual investors
- Individuals holding Power of Attorney on behalf of the investor
- Estate executor of a deceased investor
- Adult(s) or a guardian investing on behalf of a minor
What Transactions Require KYC Compliance?
A wide variety of transactions require investors to be KYC complaint. These include:
- New Purchases of mutual funds, stocks, etc.
- Additional Purchases of mutual funds, stocks, etc.
- Switch Transactions of stocks and bonds
- SIP registration for Mutual
- MICRO SIP registration
- STP registration as well as others.
It is important to keep in mind that e-KYC is a one-time process which is legally mandatory based on current government regulation.
How to register for eKYC?
Once you have decided which financial institution you would make mutual fund investments with, you’ll need a few documents and follow the simple process to get yourself KYC compliant. However, at this point, please note that depending on the financial institution or bank, the process may vary slightly. The general steps associated with the process are as follows:
- Step1 – Download the eKYC form from your bank’s/investment firm’s website.
- Step2 – Completely fill up the form with all the necessary details.
- Step3 – Submit the form along with copies of all the relevant documents.
Key Documents Required:
- Self-attested copy of your PAN card
- Self-attested copy of your address proof (voter’s ID, driving license, etc)
The digitised process for acquiring KYC compliance has eliminated the troublesome paperwork it used to involve earlier and has significantly reduced the processing time for investors.