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The implementation of two-factor authentication has led to two-pronged problem for MFDs — glitches in transaction platforms and difficulties in getting senior citizens and NRI clients to authenticate transactions using OTP.
Since the start of this month, MFDs including online direct distribution platforms have been facing delay in processing of transactions and redemption failures. There are also cases when refunds were stuck for weeks.
These issues stem from the failure of transaction platforms to perfectly implement some big changes that came into force in July. These regulatory changes include discontinuation of pool accounts, introduction of two-factor authentication and mandatory verification of contact details.
A senior official of Coin by Zerodha requesting anonymity said that his company has witnessed substantial rise in number of failed transactions. “While many of our clients have seen rising instances of failed transaction, a major chunk of investors saw their redemption proceeds not being credited to their account within the stipulated timeline. This is happening due to glitches at one of the exchange platforms.”
In the past few weeks, many investors have taken to Twitter to complain about stuck mutual fund transactions. Investment platforms reacted to these complaints saying that the transactions were stuck at the transaction platform's end.
"The unit allocation is pending from the BSE's end. Our team is already following it up with the exchange and we are trying our best that the units get allocated on priority," Groww responded to one complaint.
We spoke to some MFDs and all of them had faced issues in executing transactions this month. Apart from transaction failures and delays, MFDs have also faced situations when transactions didn’t go through despite clients authenticating them from their end. However, they say that most of the issues are now resolved.
The two factor authentication has made investor's approval compulsory for creation of new folios and redemptions. The new process mandates AMCs to authenticate redemption requests by sending an OTP to the mobile number or email id of investors. The first factor authentication is logging into the MF investment account itself.
