There is a ten-fold rise in KYC applications by investors; mutual fund transactions drop for want of KYC compliance
Mumbai: Mutual fund investors are hurrying to complete know your customer (KYC) formalities after the deadline passed on December 31, 2010.
CDSL Ventures Ltd (CVL), which has been entrusted with the task of completing KYC procedures of existing investors, has seen a ten-fold increase in KYC applications received since January 1, 2011.
CVL received 1,200-1,500 KYC applications every day till December 31, 2010. In the New Year so far, it has been receiving around 12,000 applications every day.
Mutual funds have already seen a drop in the number of transactions as many investors, including non-resident Indians (NRIs) are still to comply with the KYC norms.
Computer Age Management Services (CAMS), which handles the back-office for 16 mutual funds, has seen a 50 per cent drop in transaction numbers since January 1, a senior official with the registrar and transfer agent (RTA) said on the condition of anonymity. He, however, declined to give transaction numbers.
Mutual fund officials said the situation will improve in the days to come as distributors are rushing to get the KYC of their clients done. “There will not be any major blow to the industry but there might be some hiccups. Based on the facts, it looks like a short-term pain,” said the sales head of a private fund house.
“Business will slow down and things will get delayed. Some of the NRI clients do not have passports and some original documents with them,” said one of the top distributors from Mumbai.
The sudden rush for complying with KYC regulations has led to delays in processing of the applications. Industry sources said about 10,000 applications are pending processing in Mumbai alone.
“AMCs will endeavour to have the KYC done rather than turn away an investor. There are well defined processes and designated organisations which help in going through the KYC process. The KYC task is already on hand and I don’t think there is going to be any huge difficulty,” said T P Raman, Managing Director, Sundaram Mutual Fund.
All new and additional investments, including under systematic investment plans (SIPs), systematic transfer plans (STPs), dividend transfer plans (DTPs) and switch transactions, from January 1, 2011 require mandatory KYC compliance. KYC compliance is essential under the Prevention of Money Laundering Act 2002.
“The industry has voluntarily initiated an education drive to ensure that investors are KYC compliant. Besides, investors under the micro SIP category have a liberal alternate process of KYC documentation,” said Jimmy Patel, CEO, Quantum Mutual Fund.
