All you should know about E-KYC in mutual fund investments

If you are not eKYC compliant, You will have to provide your Aadhaar number online on the KRA website. after keying in otp, you are eKYC compliant

Every mutual fund investment or any investment that deals with share markets, banks, and any formal market regulated by the government has a mandatory “Know Your Customer,” or KYC.

KYC is a process to uniquely identify every customer or investor on the basis of residence proof, identity proof, PAN card, photograph, etc. The KYC process identifies an investor in the eyes of the regulator and, in the process, acts as the first deterrent in preventing identity theft, financial fraud, risk management, money laundering, and much more.

This makes the process the basis for enabling any financial transaction inclu-ding investing in mutual funds. So, how can you be KYC-compliant Read on to know.

EKYC: A convenient way to fulfill KYC norms Before they can begin inv-esting in mutual funds, in-vestors are required to fulfill KYC requirements with a KYC registration agency (KRA) such as www.cams-kra.com, www.nsekra.com, www.karvykra.com, www. cvlkra.com, etc, and this is applicable to all investments across funds.

Traditionally, the KYC proofs are submitted in hard copy format. Hence, the user has to fill up a form, attach the required documents, and submit to the authorities.

Additionally, the investor has to appear for in-person verification (IPV) for final confirmation. However, keeping with the times, the market regulator allowed eKYC, or “electronic Know Your Customer” process in 2013, whereby investors could submit the KYC requirements online. The objective of eKYC is to reduce the turnaround time for customer verification, which used to take anywhere between one and three weeks with the existing KYC process, which requires documents in hard copy format.

The eKYC makes the entire procedure paperless and, hence, more convenient for investors while cutting down the verification time drastically. Mutual Fund investors, who have not provided their KYC details yet, can now do it the eKYC way.

Know if you are KYC compliant Before you apply for KYC or eKYC, you can check online if you are already KYC-compliant. All you have to do is log into the KRA website and enter basic details such as PAN number to check the KYC compliance status.

If you are KYC compliant, you do not need to take any further action. If you are not KYC compliant, you can make use of the eKYC facility to complete the KYC formalities.

Documents needed for EKYC The eKYC process is based on the Aadhaar card. You will have to provide your Aadhaar number online on the KRA website. Once you fill up Aadhaar card number and submit, the system will send a one-time password or OTP to your Aadhaar card-linked mobile number. Enter this number on the Aadhaar authentication screen for authentication. Your Aadhaar and registered mobile number will be verified with the Aadhaar database of the UIDAI.

Upon successful verification, you are e-KYC verified and can carry out transactions in mutual funds.

The Aadhaar card-based eKYC process is very convenient.

The mutual fund companies get your data through the Aadhaar card-linked database. Moreover, unlike in regular KYC process, there is no need of an in-person verification under eKYC regime.

Limitations with EKYC Though the eKYC process is simpler, there is a caveat. The eKYC process is applicable for micro SIP investments only. A person with eKYC verification can invest up to '50,000 per year in mutual fund. If you want to invest higher than '50,000 annually, you have to go through normal route of KYC compliance and appear for IPV. Moreover, only a handful of mutual fund companies provide eKYC verification through their website. For the majority, you still have to follow the offline model.

While eKYC certainly makes life convenient for investors, its limit may be a dampener for investors looking for easy compliance procedures. An annual investment of '50,000 comes to a SIP of around '4,000 per month. An average investor invests higher than this amount. While eKYC may help in financial inclusion, it may slow down the rate of adoption of KYC compliance processes by many investors in MFs unless the limit is increased.

The writer is the CEO of BankBazaar.com