The Importance of KYC
When KYC is required
- Investing in mutual funds: The KYC mandates, in this case, are provided by SEBI (Securities and Exchange Board of India).
- Opening a new bank account: The applicable KYC requirements, in this case, are provided by India’s Apex Bank, the Reserve Bank of India.
- Applying for a new loan or credit card: The KYC requirements in this case too are mandated by the Reserve Bank of India (RBI), India’s highest banking authority.
- Opening of lockers: Though the KYC documentation needs to be submitted by the bank, the requirements are prescribed by the RBI.
- Change in KYC status: KYC status includes some key personal information such as permanent address, communication address, authorized signatories, etc. which are liable to change periodically. In the case of such a change, a KYC change request in the prescribed format needs to be submitted along with applicable supporting documents.
- Additional KYC documentation: KYC norms and regulations may undergo periodic change as per the decisions of the governing authority such as RBI or SEBI. In such cases, the available documentation may no longer be sufficient for completion of KYC. In such an eventuality, additional documents may need to be submitted in order to maintain KYC status or KYC verification of the existing account/financial service.
Documents Required for Mutual Fund KYC Verification
- Completely filled out KYC application
- Self-attested copy of PAN (Permanent Account Number) card
- Government Issued Identity proof document (self-attested copy)
- Government Issued Address proof document self-attested copy (may not be required if communication address and permanent address are the same)
- Colour photographs (passport size)
- A 'cancelled cheque' of the applicant’s registered bank account
The above list is designed to provide an illustration of what a prospective investor may be required to provide when undergoing mutual fund KYC. The exact requirements may vary depending on the intermediary/AMC approached or the existence of previous investments. In some cases bank account statement of past 6 months or other income proof documents may need to be submitted by the investor for completion of paper KYC formalities.
As might already be evident, the paper KYC requirements for mutual fund investments are quite extensive and time-consuming. However, the process has now been streamlined to a large extent with the introduction of the Aadhaar eKYC system. The following are the requirements for eKYC for mutual fund investments:
- Submission of online form
- Valid Aadhaar Card (only Aadhaar number is required)
- Valid Pan Card (Image of self attested copy)
- Image of self attested cancelled cheque of applicant’s registered bank account
Additionally, the applicant’s mobile phone number needs to be mandatorily registered with the Aadhaar database in order to receive OTP as part of the eKYC process. No paper documents need to be provided in order to complete the process though sometimes scanned self attested copies may need to be uploaded in order to complete the process. There is at present a key limitation with respect to the amount that an investor can make annually if he or she is eKYC compliant. Only Rs. 50,000 can be invested annually per mutual fund in case of completely online eKYC. In order to invest beyond this limit, the investor needs to complete in person biometric authentication at a registered KRA centre.
PAN Card – A Pre-requisite for Mutual Fund KYC
The PAN is a 10 digit alphanumeric code that is unique to the holder of the card. This code plays a key role in helping authorities track various financial transactions ranging from active loan/credit card accounts and large cash deposits to mutual fund investments. The PAN is also key information that is used by Credit Bureaus such as Experian, CIBIL, Equifax and CRIF Highmark in order to generate credit report and score. Additionally, the permanent account number also plays a key role in helping an investor determine his/her mutual fund KYC verification status.
How to Check KYC Status Using PAN Card
After submission of KYC forms either via the online or the offline route, the application undergoes various checks in order to ensure that the relevant KYC compliance requirements are met. Once the KYC status is verified and an individual is declared to be KYC compliant, the details of KYC compliance are uploaded to a centralized database as per SEBI guidelines. Once the KYC information has been updated on the central database, a prospective investor can check KYC status for MF using by providing their PAN number on the designated web page of registered KRAs operating in India.
The following are the steps for checking mutual fund KYC on the CVL (CDSL Ventures Limited) KRA Database:
- Go to the web page CVL KRA KYC PAN Inquiry page.
- On that page, you can fill out your alphanumeric PAN and the captcha.
- Alternate method without use of PAN includes input of details such as Applicant Name, Date of Birth and Exempt Category (if applicable, select from options provided otherwise select the “SIP of Mutual Funds” option)
On providing the above you will get an output similar to this:
Screenshot1. CVL KRA KYC Status Check Result
In case there is a problem with KYC verification, details of that will also show up in the output obtained from CDSL Ventures Limited table as shown above in the “KYC Hold Reason” section of the table.
Alternately, individuals can also check their KYC status online using the KARVY KRA database. The following are the steps to check KYC status using the KARVY KRA database:
- Log on the KARVY KRA PAN Search web page.
- Input your PAN details and the captcha provided on the page to display the KYC Results as follows.