Know Your Customer (KYC) for mutual funds works the same way as that for other financial services. It’s a customer identification process carried out by all financial institutions including banks and asset management companies.
KYC Registration Agencies (KRAs), entities registered with the Securities and Exchange Board of India (SEBI), maintain KYC records. The Reserve Bank of India set up the KYC guidelines in 2002. Along with these guidelines, the SEBI master circular on Anti Money Laundering Standards emphasises the requirement for the customer identification procedure.
Why is KYC Mandatory for Mutual Funds?
The Prevention of Money Laundering Act, 2002 requires you to complete the process of KYC before investing in mutual funds. It helps establish your authenticity as an investor by making sure you provide your real name and other necessary details. The process also ensures that you have constructive investment purposes and don’t come with a history of defaults. This helps prevent risks of fraud and money laundering in future.
Who Needs KYC Compliance for Mutual Funds?
Whether you want to invest in a mutual fund through SIP (systematic investment plan) or with a lump sum, you must complete the KYC procedure. You only need to go through a one-time verification for transactions across all funds. KYC compliance for mutual funds applies for:
- Non-individual(s) or individual(s)
- One who has legally become an investor, for instance, after the death of the original investor
- Constituted PoA (Power of Attorney) holder(s)
- A guardian who wants to invest on behalf of a minor
How to Get KYC Compliance?
You can check whether you have already gone through the KYC compliance process by entering your PAN details on the particular mutual fund website or the KRA website. Then you can also see the last modification date and whether you need to provide any missing details.
If you have completed the KYC procedure at an AMC or KRA branch or via a SEBI-registered intermediary like a mutual fund, DP or broker, you need not go through the process again.
If you are not KYC compliant, you can go through the process online or offline. For the online (video) method, you need to upload scanned images of your signature and proofs of address and identity with an original photograph. To carry out the process physically, you (including all joint holders if any) can download the KYC form online from the mutual fund website. Then each applicant must fill it up and submit it with proper identity and address proofs. When you submit the documents, you need to appear in person for their physical verification.
After the procedure, use the SIP compounding calculator to check the estimated returns of your chosen investment scheme.
Now that you see it’s so easy to carry out KYC for mutual funds, complete the procedure soon so you can start making investments right away. Besides, always make sure that the information in your KYC records is updated. To modify any information, you need to submit a KYC details change form with the required documents like a current address proof if your residential address has changed.