Aadhaar is likely to become mandatory for investments in mutual funds, according to a newspaper report published in ‘The Economic Times’. The report said that government and SEBI are planning to link Aadhaar to financial market transactions as they believe that PAN is not sufficient to take care of the irregularities in taxation.
If SEBI makes Aadhaar mandatory, experts say that it will have positive impact on the mutual industry.
Suresh Soni, CEO, DHFL Pramerica Mutual Fund says that if Aadhaar becomes the only required document, it will make on-boarding of clients simpler for advisors. “This move may help the mutual fund industry witness a ‘Jio-like’ scene where 100 million customers on-boarded in a short span,” says Suresh.
Swarup Mohanty, CEO, Mirae Asset Mutual Fund seconds Suresh’s view and said that the move will increase investor base. “It can expand mutual fund client base as the number of Aadhaar card holders are more than PAN card holders. However, the move will benefit if SEBI allows Aadhaar as a single document to invest in mutual funds,” says Swarup.
Swarup adds that making Aadhaar mandatory for MF investments is in line with the government initiatives to link Aadhaar with other services such as banking and mobile connection.
However, a few experts have a different view. Jimmy Patel, CEO, Quantum Mutual Fund says that the move will not lead to any value creation. “Banks have all the documents and data that they need. Government should push banks to link account with Aadhaar. Investors invest through their bank accounts. The step will only further increase the compliance cost of AMCs. We have seen that cost of KYC has increased after investors submit their Aadhaar card during eKYC process,” says Jimmy.
Suresh Sadagopan of Ladder7 Financial Advisories too believes that making Aadhaar mandatory will only lead to headaches for advisors. “Updating every client’s folio with the Aadhaar number will be a humongous task. In my view, SEBI will make Aadhaar just like an additional document that the investor would have to submit,” says Suresh.
Earlier in May, Cafemutual had reported that AMFI had requested SEBI Chief Ajay Tyagi to simplify customer on-boarding by allowing bank KYC and Aadhaar as a valid proof to invest in mutual funds.
Currently, investors need a PAN card, an address proof and a cancelled cheque to undergo KYC. However, Aadhaar card holders have already undergone In Person Verification (IPV). Ideally, the industry does not need to do KYC and IPV again.
A few days back, IRDAI Chairman TS Vijayan has said that the insurance regulator is considering using Aadhaar to simplify KYC process.
