A long standing demand of the Distributor fraternity to make bank KYC as a valid proof to invest in mutual funds may finally be close to becoming a reality.
The launch of central KYC (CKYC) registry agency can eliminate the need to do fresh KYC for investing in mutual funds if investors are already KYC compliant with either banks or capital markets.
This is part of the Central KYC project announced by the Union Budget 2012-13 to eliminate multiplicity of registration of KYC data. All financial institutions and intermediaries will be required to upload KYC data on DotEx platform, a NSE company which has won the mandate to maintain this database. The RBI has already directed banks to do a pilot run by uploading customer data on this platform.
CKYC registry will link different identity proofs like PAN, Aadhaar and passport of an individual to help track all financial transactions.
“The concept is good. The implementation has to be smooth. This will help the growth of MF industry,” said Harshendu Bindal, President, Franklin Templeton Mutual Fund.
“Just like Aadhar which is accepted everywhere, you have to do one KYC which will accepted across the board - mutual funds, banks, telephone operators, etc. We don’t need to do KYC again and probably all the KYCs which are already done by banks will be uploaded on the DotEx KRA operated by NSE,” said C. VR. Rajendran at the Cafemutual IFA Event 2016 held in Mumbai recently. He was responding to a question from the audience on why bank KYC is not sufficient as a valid proof to invest in mutual funds.
Rajendran said that the platform is currently under the testing mode and should be operational by April 1. He said that investors may not be required to do fresh KYC if they are already KYC complaint with capital markets or banks.
However, the CEO of a private sector fund house who is in the know of the development said that there are many loose ends which need to be tied. “SEBI has set up five KRAs for capital markets and mutual funds. If a national KYC is rolled out, what will happen to these KRAs? Fund houses require IPV. We need to see how this (IPV) can be done,” said the CEO of a private sector fund house.
He said that this KYC would be applicable for all financial as well as non-financial transactions and is expected to be introduced in a phased manner, starting with mutual funds, insurance and real estate products.
Fund officials say that the move will help the industry in a big way.
“AMCs spend around Rs. 35-Rs.40 to do the KYC of one investor. If national KYC is rolled out seamlessly, this cost may come down drastically. Currently, investors have to wait for 10-30 days, depending on the complexities, to become KYC compliant with mutual funds. This will help mutual fund investors in a big way,” said Jimmy Patel, CEO, Quantum Mutual Fund.
