Around 1.3 crore mutual accounts are ‘on hold’ due to incomplete KYC, according to KYC registration entities (KRAs). The reason behind this is that the individuals have provided non-Aadhaar and non-officially valid documents (OVDs) during the initial KYC registration process. As per the new rules set by the Securities and Exchange Board of India (SEBI), effective from April 1, 2024, investors with an ‘on hold’ KYC status will not be able to carry out any transactions in mutual funds. This includes investing in new mutual funds or redeeming units from existing mutual funds.
As per a Times of India news report, “The need to reclassify KYCs under various categories arose after it was found that KYCs of many investors were still not updated with PAN and Aadhar, and the linkages were missing. Several of these KYCs were done using documents like utility bills (electricity, telephone), bank account statements etc., which are no longer accepted as valid documents for KYC compliance by Sebi.”
The report further said, “Of nearly 11 crore investors, about 7.9 crore or 73% have valid KYC. KYCs of about 1.6 crore investors are under the registered category, who now have limited access to investing, while 12% of the total can’t operate their demat accounts and MF folios.”
Hence, it is important for a mutual fund investor to check his/her KYC status before undertaking any transactions. Here is how you can check the KYC status of your MF account.
How to check KYC status online
An investor can check their KYC status easily online by following the steps below:
Step 1: Go to any KRA website. In this example, we have visited www.CVLKRA.com. One can also visit www.CAMSKRA.com to check their KYC status.
Step 2: On the CVLKRA website, click on “KYC Inquiry”
Step 3: A new webpage will open. Enter your PAN, click on captcha and click on “Submit”.
The KYC status will be displayed on the screen based on the PAN entered. An investor’s KYC status can be any of the three categories: validated, registered, or on hold.
It is important to understand the meaning of different KYC statuses. This will help investors easily understand what they must do to make transactions.
Also Read: Meaning of different KYC status
If the status is KYC validated: It means that the documents provided by the investor are validated from the issuing source. If there is no change in the information in the documents, a mutual fund investor can easily invest in any mutual fund scheme. Currently, only PAN and Aadhaar can be validated from the issuing source, as per FAQs issued by CAMS. So those who have given PAN and Aadhaar for KYC will likely have their KYC status validated. They can continue to invest in multiple mutual fund companies without undergoing the KYC process again.
If KYC status is registered/verified: This means the documents given by the individual cannot be independently verified or validated by the issuing authority. This applies to individuals who have given other officially valid documents (OVD) (other than PAN or Aadhaar), such as passports, voter ID cards, etc., as proof of address and identity for completing the KYC process.
If the KYC status is either ‘KYC registered’ or ‘KYC verified’, then there will be no impact on their existing investments. However, if they wish to invest in a new mutual fund scheme, then they are required to submit the KYC-related documents again.
If such individuals want to have ‘KYC Validated’ status, they can undergo a re-KYC process by submitting their PAN and Aadhaar. This will help them to seamlessly invest in schemes of different mutual fund houses in the future without the need to provide documents again.
KYC—on hold: The KYC status will be shown as ‘on hold’ if the documents given at the time of initial KYC are not official valid documents such as voter ID card, passport, etc. but bank statements, electricity bills, utility bills, etc. This can also happen if the investor’s mobile number and email ID are not validated.
Due to ‘on-hold’ KYC status, all financial and certain non-financial transactions will be restricted till the required documents are submitted. This would mean that current SIP transactions, redemption transactions, etc., will be impacted.
In such a case, the mutual fund investor will have to verify their valid email and mobile number to do transactions in their existing mutual fund schemes. Further, mutual fund investors should undergo the re-KYC process (by submitting PAN / Aadhaar) to avoid the submission of various documents again while making fresh investments.
