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Mutual Fund Investors Rejoice: Sebi Relaxes Aadhaar-PAN KYC Rules for Easier Transactions

An investor's identity must be verified by banks, fund houses, and stock brokers before they can invest, ensuring that the entities know their clients well and can prevent fraud.

By Newsd
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Sebi Relaxes Aadhaar-PAN KYC Rules for Easier Transactions

Sebi Relaxes Aadhaar-PAN KYC Rules for Easier Transactions: To obtain KYC-registered status for mutual fund transactions, the Securities and Exchange Board of India (Sebi) has removed the requirement to link the Permanent Account Number (PAN) with Aadhaar.

KYC – what is it?

An investor’s identity must be verified by banks, fund houses, and stock brokers before they can invest, ensuring that the entities know their clients well and can prevent fraud.

KYC requirements have changed

During the month of October 2023, Sebi mandated all mutual fund investors to link their PANs with Aadhaar by March 31, 2024 to complete the KYC process. The KYC process would be halted if PAN and Aadhaar were not linked, preventing any investment activity. As proof of address, a bank passbook or account statement could also be used.

The issue reportedly affected over 13 million accounts where KYC updates were incomplete as a result of these changes.

During the initial KYC registration process, individuals provided non-Aadhaar and non-officially valid documents (OVDs).

Currently, Sebi has eased these requirements with a revised circular issued on May 14. Investors no longer need to link their PAN with Aadhaar in order to become “KYC-registered”. Other Officially Valid Documents (OVDs), such as Aadhaar, passport, driving licence, or voter ID card, can be used to complete KYC.

“KYC-validated” status requires linking PAN to Aadhaar. This status signifies that the investor’s KYC is based on Aadhaar, along with their mobile number and email address.

The old rules were:

  • To complete KYC, investors had to link their PAN with Aadhaar.
  • KYC would be halted without this link.

The new rules are:

  • From 14 May, Sebi will no longer require investors to link their PAN and Aadhaar to qualify as KYC-registered.
  • By completing KYC with other Officially Valid Documents (OVDs), such as Aadhaar, passports, driving licences, and voter ID cards, investors can gain “KYC-registered” status.
  • To obtain “KYC-validated” status, PAN and Aadhaar must still be linked.

Framework for risk management at Sebi

KYC Registration Agencies (KRAs) were required by Sebi to verify three attributes of all clients’ records within two days of receiving them:

  • The PAN (including the linkage between the PAN and the Aadhaar)
  • The name of the company
  • Addresses

As a result of the May 14 circular, the PAN and Aadhaar linkage no longer needs to be verified.

What is the process of checking an investor’s KYC status with a MF?

Visit www.cvlkra.com and click on KYC inquiry to find out the status of your existing MF KYC. You will get the following three results:

On-hold KYC status: Investors with on-hold KYC status cannot invest in mutual funds, including systematic investment plans (SIPs), lump sum purchases, or redemptions.

A KYC-validated investor has no restrictions on transactions and can deal with any fund house.

Also Read: FASTags with incomplete KYC to be deactivated post Jan 31

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