Now mutual fund distributors can use Aadhaar based e-KYC to onboard clients.
In a circular released on November 5, SEBI has revived Aadhaar-based eKYC for mutual funds. Moreover, the circular does not specify any upper limit on such investments. In its previous avatars, Aadhaar-based e-KYC holders were allowed to invest up to Rs 50,000 in a financial year.
To avail this facility, SEBI has asked IFAs to register with a KYC user agency (KUA) as a sub-KUA. The KUA has to register itself with Unique Identification Authority of India (UIDAI).
After you register yourself as a sub-KUA, you can complete Aadhaar-based eKYC of your clients. Here are the steps that you need to follow:
- Direct investors to the website of the KUA
- Investors need to enter their Aadhaar number or Virtual Id and provide consent on the KUA portal
- After this, investor will receive a one-time password (OTP) from UIDAI, which they need to enter on the KUA website and fill any additional details as required under KYC format
- Following successful Aadhaar authentication, KUA will receive the e-KYC details from UIDAI
- The KUA will further forward e-KYC details to you in an encrypted format and display it to the investors on portal
Alternative
- If investors do not want to take the OTP route, they can complete the KYC on a registered or whitelisted device operated by distributors using biometric details
- In this process, KUAs have to ensure that all devices and device operators of Sub-KUAs are registered or whitelisted devices
SEBI has asked KUAs and distributors to ensure that the Aadhaar number is not stored anywhere. Wherever required, only the last four digits of Aadhaar number has to be displayed.
Impact
The move is seen as a huge boost for the MF industry.
The previous version of eKYC was discontinued in September 2018 after the Supreme Court directed fintech companies to stop using Aadhaar based authentication.
Sunil Subramaniam, MD & CEO, Sundaram MF feels that the move would reduce time for client onboarding and help MF penetration further.
Nithin Kamat, Founder and CEO, Zerodha said this measure would reduce paperwork for onboarding clients and help the industry expand. However, he feels that an explicit clarification on the limit under Aadhaar-based e-KYC will be helpful for the industry.
