Understanding the name mismatch issue

Drama starts where logic ends.

By Ram Charan, Noted Author

According to the new norms, mutual fund investors will have to ensure that their name and date of birth appearing on PAN and MF folio match completely.

As part of this guideline, fund houses will have to verify the PAN of their clients at the Income Tax website without insisting on the copy of PAN card.

So far, the process was executed purely on logic basis. For instance, if the name appearing on MF application is R Sharma and PAN is Rohit Sharma, it was considered as valid match. Another example is NP Pvt. LTD in MF application and NP Private Limited in PAN was considered a valid match.

Simply put, RTAs like CAMS and KFintech were allowed to build additional name-matching logic to facilitate transaction.

However, under the current guidelines, RTAs can only seek reverse feed from the Income Tax Department (ITD) and PAN Card with a ‘Yes’ or ‘No’. This takes away the liberty of RTAs of applying the name matching logic at their end.

Even minor variation like expansion of initials, change in order of name can be considered a clear ‘No’ or mismatch.

Let us look at the table to understand this:

The new PAN validation process is effective from April 30, 2024.

All MF investors with name and DOB mismatch will be considered as Not in Good Order (NIGO). Such investors will have to update the name either in ITD/PAN card or in MF folios. However, it will be carried out on fresh application. Also, this holds true for nominee/nominees for transmission of MF units in case of the death of an investor.

This means that existing investors with different name can continue to execute transactions including SIP and redemption in their existing mutual fund schemes. However, if these investors want to execute transactions in a new fund house or if the new fund house validates such a KYC, it will not go through. These investors will have to first incorporate changes to their existing KYC details.