Relaxation on KYC! No Blockage of Mutual Fund Accounts for Missed Deadline

April 2, 2024 Mutual Fund

In a significant development for mutual fund investors in India, the deadline of March 31, 2024, for completing Know Your Customer (KYC) Updation in order to continue transacting in mutual fund schemes has been relaxed.

According to the latest communication sent from CDSL Ventures to Mutual Fund Distributors (MFDs), your mutual fund accounts will not be blocked if you missed the March 31st deadline for KYC Updation. However, failure to do so will now lead to your KYC being ‘put on hold’ instead of blocking any transactions such as SIP (systematic investment plan), SWP (systematic withdrawal plan) and STP (Systematic Transfer Plan).

While accounts remain accessible for existing transactions, limitations exist for investors with pending KYC. New investments into existing folios or purchases in new schemes might be restricted; complete redemption of existing units may also face limitations until KYC Updation is completed.

This revision comes after the industry acknowledges the challenges faced by investors in completing the process within the stipulated timeframe.

[Read: Common KYC for All Your Financial Investments Soon]

KYC Updation for Mutual Fund Investors

A prior notification stated that if your mutual fund KYC is not based on an officially valid document as specified by CAMS and KFintech, you will have to re-do your KYC by March 31, 2024. Failure to do this will mean your account may get blocked, and you will not be allowed to do any MF transactions from April 01, 2024.

The officially valid documents include an Aadhaar card, passport, and voter ID card, among others. KYC done based on proofs such as bank statements and utility bills will no longer hold valid after this deadline.

In order to ensure compliance with the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 and a SEBI master circular on KYC rules for the security market (dated October 12, 2023), a re-KYC is being conducted.

However, the requirement to complete a new KYC in order to maintain the operation of mutual fund folios was dropped when the deadline to get the fresh KYC was only 72 hours away, albeit for the existing investors. This action was taken in response to a letter that one of the KYC registration agencies, CDSL Ventures, sent on March 28, 2024.

Although the current mutual fund investors can heave a sigh of relief now, it does not offer any solace to the new investors they need to undergo fresh KYC as per the extant framework.

Importance of KYC Updation

While immediate account blockages are averted for existing investors, completing KYC Updation remains crucial. KYC is a regulatory requirement, and updated KYC helps mutual funds verify investor identities and deter fraudulent activities in your investment accounts.

A KYC mismatch can lead to delays or rejection of future transactions. Uninterrupted investment plans and seamless portfolio management rely on proper KYC. Non-compliance with KYC regulations can lead to penalties or account restrictions in the future.

[Read: Have Your KYC Details Changed? The KYC Modification Process Will be Online Soon]

What Investors Should Do

Despite the relaxed deadline, investors are strongly advised to complete their KYC Updation at the earliest. Here are some steps to follow:

• Contact Your Mutual Fund Distributor:  Get in touch with your mutual fund distributor or investment advisor for assistance with the KYC Updation process.
• Documents:  Ensure you have the necessary valid documents like PAN card, address proof, and identity proof readily available.
• Online Updation:  Many mutual fund houses and distributors offer online KYC Updation facilities. Explore this option for convenience.
• Offline Updation:  If online Updation is unavailable, visit your investment advisor’s office or the nearest branch of the mutual fund house.

While no specific deadline has been announced yet, it’s advisable to complete your KYC Updation at your earliest convenience to avoid any future restrictions. Do note that if your mutual fund account is held jointly, all account holders must update their KYC information.

In addition, any changes in your personal details like name, address, or phone number should be communicated to your KRA and mutual fund house promptly to maintain KYC accuracy.

To conclude…

The relaxation of the KYC deadline for existing mutual fund investors offers a sigh of relief. However, it shouldn’t be seen as an excuse to postpone KYC Updation. Completing your KYC is essential for a seamless investment experience, regulatory compliance, and overall security of your mutual fund holdings. By proactively addressing KYC requirements, investors can safeguard their financial interests and ensure a secure and hassle-free investment journey in the world of mutual funds.

This article first appeared on PersonalFN here