The mutual fund industry has welcomed the government’s move to ease the KYC process for easy access to capital markets. The Finance Minister in the Union Budget 2020 has proposed to generate new PAN immediately based on Aadhaar.
In her Budget proposal, the Finance Minister Nirmala Sitharaman said, “We will launch a system under which PAN shall be instantly allotted online on the basis of Aadhaar without any requirement for filling up of detailed application form.”
The move will make it easier for investors to invest in mutual funds and insurance industry as the PAN is mandatory in mutual funds. In last year’s budget, the government had allowed interchangeability of PAN and Aadhaar i.e. using Aadhaar where PAN is required. However, the move did not fare well for investors with SEBI making PAN mandatory for all mutual fund transactions including redemptions last year. In fact, PAN exempt folio holders will have to update their KYC details with PAN to redeem their investments from mutual funds.
Commenting on the government’s decision, Swarup Mohanty, CEO of Mirae Asset Mutual Fund said, “It is a huge positive for the MF industry as it has become much easier to on-board new investors. Absence of PAN was one of the reasons why many people have not invested in mutual funds. In fact, many advisors have to ensure that their clients have PAN to invest in mutual funds. Now, it will get easier for them.”
Seconding his view, Sunil Subramaniam, MD & CEO, Sundaram MF said, “The move is encouraging for the industry. It offers entry points to investors not having PAN. The next few years will be a reflection of this development.”
Mumbai IFA Sadashiv Arvind Phene believes that IFAs will now be able to reach people living in remote areas and non-taxpayers not having PAN. “I have seen many investors losing interest in mutual funds investments due to the cumbersome KYC process. The recent move of the government would help us on-board such clients within a few minutes with the help of Aadhaar.”
Meanwhile, some industry experts believe the development might not bring the desired results.
Vishal Kapoor, CEO, IDFC AMC said, “While it is a welcome move, we should be realistic. It is not that the move will bring more investors just because obtaining PAN has become easier.”
“I believe if the government makes possession of a bank account adequate enough for investing in mutual funds, it will help the mutual fund industry increase its penetration,” said Mumbai IFA Dhruv Mehta.
Currently, there are over 121 crore Aadhaar card holders in India.
