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New Mutual Fund e-KYC Guidelines by SEBI that all Domestic Investors should be Aware Of!

Highlights

  • The new notification by SEBI can boost the Indian economy by getting more investors to invest in mutual funds.
  • Latest e-KYC process for mutual fund investment is easier, faster and highly secure.

Securities & Exchange Board of India (SEBI), on the 5th of November, issued an important five- page circular, which is expected to boost the Indian Mutual Fund Industry immensely in terms of increasing the investor base. The crux of the new mutual fund e-KYC Guidelines is focussed around the electronic KYC process for domestic investors.

According to the Prevention of Money Laundering Act (PMLA), intermediaries and mutual fund distributors in the securities market who are notified by the central government can go forward with the Aadhar authentication process. So, as per the latest notification by SEBI, all the intermediaries and mutual fund distributors are required to complete the eKYC process by registering themselves with a KYC User agency (KUA). This KUA then should be registered with the UIDAI. All the distributors and intermediaries will be treated as sub-KUAs, as a result of this. 

What will be the Benefit of this New e-KYC process?

One of the major benefits of the new electronic KYC structure is that it will make the onboarding process of mutual funds easier and faster. Earlier, the onboarding process would deter a lot of investors from investing in mutual funds. Presently, only 2 percent of the Indian population invests in mutual funds. That’s fairly low for such a big country. If more investors step in, this will not only boost the mutual fund industry but also give an impetus to the Indian economy. 

How to Go Forward with the e-KYC Process?

There are two ways by which domestic investors can undertake the electronic KYC process. Either they can register though the Online Portal or the Assisted Investor method. The latter is more like an offline method. Let’s discuss both these methods in detail:

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Online Portal based Investor e-KYC Process:

  • Visit the KUA’s website or the intermediary registered with SEBI (also known as Sub-KUAs) 
  • The user is directed to the KUA portal for Aadhar e-KYC, where they enter their Aadhaar Number or Virtual Id, confirming their consent. Stringent measures will be taken in order to make sure that the Aadhaar number is not stored anywhere else by the KUA or sub-KUAs.
  • An OTP will be sent to the investor’s registered mobile number by UIDAI. This OTP should be entered by the investor to complete the Aadhar e-KYC.
  • UIDAI will send the e-KYC details to the KUA, which in turn will be sent to the sub-KUA by KUA in an encrypted format. This can be viewed by investors on the portal.
  • Investors need to upload other KYC details.
  • Finally, the intermediary will have to upload additional KYC details to the KUA.

Assisted Investor e-KYC Process:

  • Investors approach any entity that is registered under SEBI such as any mutual fund distributors or appointed persons for e-KYC through Aadhaar.
  • These entities will perform the KYC procedure through Whiltelisted devices with KUAs.
  • It is the job of the KUA to ensure that all operators and devices of sub-KUAs are registered with KUAs.
  • Investors need to give their consent by providing Aadhaar or Virtual Number on the registered device,
  • Then the investors have to provide biometric on the registered device.
  • Sub-KUA can get the e-KYC details through the KUA provided by UIDAI, which will be displayed to investors.
  • Investors will have to provide additional KYC details, if required.