AMFI approaches SEBI to look into KYC deadlock: Report

The Association of Mutual Funds in India (AMFI) has approached the Securities and Exchange Board of India (Sebi) to resolve the deadlock around the investors' Know Your Customer (KYC) issue. This is in addition to talks held by individual fund houses and distributors with Sebi on the issue.

Effective April 1, the newly implemented Know-Your-Customer regulations mandate that investors should meet specific criteria to engage in mutual fund transactions. Numerous investors have expressed concerns regarding their inability to make new investments, citing a lack of awareness about these changes.

After April 1, many investors have been unable to make fresh or upcoming investments after the re-KYC deadline, finding their KYC status invalid. Investors who are registered under the KYC (Know Your Customer) process are permitted to maintain their current investments, but they are not able to initiate new investments with a different asset manager. On the other hand, investors whose KYC status is on hold are prohibited from engaging in any transactions, including systematic investment plans and redemptions.

On August 11, 2023, SEBI had asked KYC Registration Agencies (KRAs) to validate different KYC attributes, including PAN-Aadhaar linkage, name, address, mobile number and email ID. 

As per news reports, investors who have registered using a document other than the officially valid documents (OVDs) have been put on hold. The seven OVDs that are recognised are Aadhaar, driving license, passport, voter card, NREGA-issued job card, National Population Register, and any other documents that have been notified by the central government.

AMFI on Tuesday released an explainer on the KYC issue and listed the remedial measures. Even Edelweiss Mutual Fund said it has set up a help desk for assistance.

“There will be a lot more efforts made to help investors with a registered status to move to the validated status in a convenient way. SEBI wants the option to modify KYC status to be made available across registrars & transfer agents, KRAs, and asset managers,” an official told the Hindu Businessline.

Besides, investors are reportedly not being informed by Asset Management Companies (AMCs) that their KYC (Know Your Customer) documentation has been put on hold. This is causing a situation where Systematic Investment Plan (SIP) money is being debited from investors' accounts and later refunded to their source account without unit allotment or redemption requests being rejected.

In some cases, investors are experiencing delays in receiving their redemption payouts due to strict KYC requirements. 

Non-resident Indians (NRIs) are facing issues opening accounts with new Asset Management Companies (AMCs) due to the lack of an Aadhar card.

KYC process

As per AMFI, investors can validate their KYC through MF websites or by submitting the KYC form offline to asset management companies or registrar and transfer agent offices.

The KRAs — CDSL Ventures, Computer Age Management Services, National Stock Exchange, and Karvy — said they have dedicated help desks and call centres where investors can call for any assistance or guidance.

“KRAs have also been sending communications to intermediaries to update them about progress on the KYC status verification exercise. KRAs also send communication to investors on any access/modification to their KYC record,” the KRAs stated.

On Wednesday, KYC registration agencies said that 73 per cent of the 108.3 million KYC records were validated as of March 31, 2024, and that the system was in place for the rest of the investors to validate their KYC.