Mutual fund investment accounts of many were flagged for re-KYC and they had to complete the exercise by April 1, 2024, failing which their folio would have been frozen. One of the primary reasons for this exercise was because some changes were made to the list of deemed officially valid documents (OVD). Earlier bank statements and utility bills were considered as OVD, but they are no longer valid documents for mutual fund investment accounts. The next question which arises is whether the re-KYC process can be done online or offline.According to VLA Ambala, a SEBI-registered research analyst (RA) and founder of Stock Market Today, “Individuals who have linked their Aadhaar with PAN and also have a mobile number linked to their Aadhaar number can do the re-KYC process online.”
Which investors have to do their mutual fund re-KYC process offline
According to Ambala, “If the address is being verified with Aadhaar and PAN then it is possible to do the re-KYC process online however if Aadhaar is not used for re-KYC then it has to be done offline. The only way an individual can complete the re-KYC process online and invest both in existing and new investment folio(s) without undergoing the KYC process again is by using their Aadhaar and having it linked with PAN.”Abhishek Kumar, a SEBI registered RIA, founder, Sahaj Money shares his experience about an individual who had given a non-Aadhaar OVD. “In one of my client’s case, he had done his re-KYC using his PAN and driving license and his KYC status showed as ‘registered’ and not ‘validated’. So, he can access his existing mutual fund account and transact, but whenever he tries to open any new mutual fund account, he is restricted from doing so. One possible reason for this may be because he had given a non-Aadhaar OVD for Re-KYC purpose. This is because my other clients who had given Aadhaar as their OVD for Re-KYC purpose are not facing this issue with the new mutual fund account opening,” he says.A client of Amol Joshi, Founder, PlanRupee Investment Services also experienced a similar event. He said, “New SIP of one of our clients did not go through because client KYC status was ‘registered’ and this SIP was the first time investment of this client in the said fund house. One needs to have KYC ‘validated’ status to invest across all fund houses. In case of ‘registered’ status, application needs to be accompanied with a hard copy of fresh KYC form and documents set or else the purchase or SIP will be rejected as it happened in this case. KYC via Aadhaar as an OVD seems to be the only way an investor can achieve ‘validated’ status in their KYC.”The difference between KYC validated and registered lies in the level of completion. According to Apurva Sarupria, Executive Director, Aastha Insurance Brokers, “KYC validated users have completed their KYC process, allowing them to invest in both old and new mutual fund folios. On the other hand, KYC registered users have only partially completed their KYC process, allowing them to invest only in old/existing mutual fund folios until their KYC is fully validated.”
Source: Kotak Mutual Fund FAQ document
What if you had not done your mutual fund re-KYC?
The consequences can be dire and will lead to you not having access to your investments if you have not done your re-KYC.
Jyoti Bhandari, Founder and CEO, Lovak Capital shares an experience of her client who did not do re-KYC for his demat account. “One of our clients had purchased bonds worth Rs 20 lakhs which was allotted to him on a private placement basis by a company. However, the client did not know that his demat account had been blocked because of Re-KYC not being done. Hence the bonds got stuck with the Indian Clearing Corporation Limited (ICCL) and by the time the client’s re-KYC got approved three weeks passed by and the transaction almost got reversed. We had to follow up with the KRA and others multiple times for this as the client got tensed since such a high value of bonds deal got stuck,” she says.
What if you had already done your KYC but the document used back then is now not an OVD
Many people used utility bills and bank statements as an officially valid document (OVD) for KYC purposes. However, both these documents are now not an OVD for the investment account’s KYC purposes.
Joshi shares his experience with one of his client’s cases. He says, “Another strange incident which happened was when our client’s KYC status was put on hold because the previous KYC was via a document that is now classified as non-OVD. The KRA agency asked for a fresh KYC form and documents set which included a hard copy of the client’s Aadhaar. However, the KYC status changed from ‘on-hold’ to ‘registered’, and not to ‘validated’. When we emailed the respective KRA agency, they told us that in order to make our client’s KYC status ‘validated’ from the present ‘registered’ status, we need to go to their online web link and again validate via Aadhaar OTP. This amounts to dual work of hard copy Form as well as further online Aadhaar OTP. If a hard copy KYC form set is submitted along with Aadhaar with QR code, there should not be any need of further OTP validation.”
What if your re-KYC captured the wrong details?
There could be a situation where an individual completed their re-KYC process but their email ID or mobile number or both were captured wrong. According to Ambala, updating wrong contact details in re-KYC would mean that this wrong information will get updated in all the investment folios.
“If there exists a situation where an individual’s phone number got wrongly captured during the re-KYC process, then as per present norms this wrongly captured mobile number would get updated in all mutual fund folios of this individual. Hence it is advisable that this individual gets his mobile number updated at once and fixes it,” says Ambala.
However, one respite is that even if all mutual fund folios are updated with the wrong contact information, the bank KYC won’t be affected.
As per Ambala, “Although no financial fraud can be done even if the mobile number or email ID of the individual is wrongly updated in KYC records, because this investment KYC is different from bank KYC records. Merging of bank KYC with mutual fund KYC is not possible right now. So, the bank will not update this number in their records, it is only that all mutual fund companies will update their KYC records with this wrong number. So technically if you don’t give your OTP and other bank sensitive details, no financial fraud can be done just because of a wrong number being updated in your mutual fund KYC records.”
