New KYC norms: All you need to know

The Securities and Exchange Board of India (SEBI) has implemented new guidelines on the Know Your Customer or KYC process for investments in the securities market. Here's an overview of the new rules and what investors need to do to continue their mutual fund investment journey with ease.

• Table of contents

1. What is KYC?
2. What do the new guidelines say?
3. For KYC done with Aadhaar
4. For KYC done with other OVDs:
5. For KYC done with deemed OVDs:
6. For Jammu and Kashmir residents
7. FAQs

What is KYC?

KYC is a process used by businesses to verify the identity of their customers, to help prevent instances of fraud, money laundering and other illegal activities.

What do the new guidelines say?

As per the new rules, individuals must submit one among a list of Officially Valid Documents or OVDs – which include Aadhaar card, passport, driver’s license and voter’s ID card – for KYC registration. Deemed OVDs such as utility bills will no longer be sufficient.

Moreover, even investors who have done their KYC against the OVDs need to check their KYC status and validate it if required.

To find out the status of your KYC, you can visit the website of any KYC Registration Agency or KRA, such as CVL KRA, NDML KRA, CAMS KRA or Karvy KRA.

Here is the list of KYC statuses and what investors need to do in each case.

For KYC done with Aadhaar

If KYC status is ‘validated’: There is no change; investors can continue doing transactions in existing as well as new mutual funds.

If KYC status is ‘registered’ or ‘verified’: No change to transactions done before March 31, 2024. Investors can continue transacting with fund houses where they have existing mutual fund schemes.
For transactions with new Asset Management Companies, investors will need to submit a fresh copy of their Aadhaar cards along with the KYC application. They can also validate their Aadhaar details online with their respective KRAs.
Once the KYC process is done with Aadhaar and is validated, investors will not need to repeat the KYC process for any fresh transactions hereon.

For KYC done with other OVDs:

If KYC is registered or verified: No change to transactions done before March 31, 2024, and investors can continue transacting with fund houses where they have existing mutual fund schemes. For transactions with new Asset Management Companies, investors will need to submit the OVDs again for KYC modification.

If KYC is status ‘on-hold’: The investor will need to re-do the KYC process by submitting any of the OVDs to the nearest AMC/or Registrar and Transfer Agent branches. They can also download the re-KYC form from the website of AMCs or intermediaries.

For KYCs done through non-Aadhaar OVDs, re-KYCs will need to be done each time the investor applies for a scheme in a new AMC.

For KYC done with deemed OVDs:

If KYC is registered: No change to existing transactions. For new mutual fund investments, re-KYC will need to be done against one of the OVDs.

If KYC is on-hold: All financial transactions in mutual funds will be restricted until one of the OVDs is submitted for re-verification.

For PAN-exempt cases:

For PAN-exempt records, other attributes such as name, address, mobile number and email address shall be verified by KRAs. The KYC status will be tagged as KYC registered and re-KYC will need to be done for each transaction in a new AMC.

For Jammu and Kashmir residents

PAN-Aaadhar linking is exempted in Jammu and Kashmir, so the KYC status will be tagged as KYC registered and re-KYC can be done using any other OVD. The process will need to be repeated for each transaction in a new AMC.

For NRIs

NRI investors are advised to complete the KYC by submitting Aadhaar as proof along with a valid email address and mobile number so that they can invest with any SEBI-registered intermediaries or mutual funds. If they do not do an Aadhaar-based KYC, the investor KYC status will be tagged as KYC registered and re-KYC will need to be done for subsequent transactions with any new fund house.

Apart from Aadhaar, the list of OVD documents that NRI investors can use include passport / PIO Card and OCI Card. Overseas address proof is mandatory.

If the OVD presented by a foreign national does not contain address details, the documents issued by government departments of foreign jurisdictions and a letter issued by the foreign embassy or mission in India shall be accepted as proof of address. If any proof of address is in a foreign language, it will need to be translated into English.

Conclusion
Investors can check their KYC status online on any KRA website within minutes. If your KYC status is validated, no change is required.
If your KYC status is ‘registered’ or ‘verified’, you can submit a modification request to the KRA online with valid contact information and updated KYC documents. If your KYC is ‘on-hold’, you will need to submit physical paperwork for this process.
Doing an Aadhaar-based KYC online will eliminate the need for undergoing a fresh KYC process each time you invest in a new fund house.

FAQs

What are the new norms?
To streamline the Know Your Customer process for investments in the securities market, investors are now required to mandatorily do their KYC with officially valid documents to continue investing. KYCs done with deemed officially valid documents will need to be updated. Deemed OVDs such as utility bills will no longer be sufficient.

What are officially valid documents?

• Passport
• Driver’s license
• Proof of possession of Aadhaar number
• Voter's Identity Card issued by Election Commission of India
• Job card issued by NREGA and duly signed by an officer of the State Government
• Letter issued by the National Population Register containing details of name/address
• Any other document as notified by the Central Government in consultation with the Regulator.

What does this mean for investors?
Investors need to check their KYC status and submit documents again if required, to ensure their KYC status is validated.

How do I check my KYC status?
To find out the status of your KYC, you can visit the website of any KYC Registration Agency or KRA, such as CVL KRA, NDML KRA, CAMS KRA or Karvy KRA.

What are the various KYC statuses and what do they mean?
Depending on the document and contact details you had submitted when you did your KYC, your status may be:

• KYC Validated: This is likely because you had done your KYC with your Aadhaar card. You can continue transacting in existing and new mutual fund schemes with ease.
• KYC Registered or Verified: This could be because you had done your KYC with your Aadhaar card that did not have a QR code, any other OVD or a valid deemed OVD. In this case, you can continue transacting in your existing mutual fund schemes but will need to do re-KYC using any of the OVDs to invest in schemes of any new asset management company.

Do note that if re-KYC is done through Aadhaar, investors will not need to repeat the KYC process for any fresh transactions thereon. If re-KYC is done through any non-Aadhaar OVD, you will need to do a fresh KYC verification each time you apply for a scheme in a new AMC.

KYC On-Hold: All financial transactions, including in existing schemes, will be restricted. Investors will need to re-do the KYC process by submitting any of the OVDs to the nearest AMC/or Registrar and Transfer Agent branches.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.