Know Your Customer, commonly referred to as KYC, enables banks and financial institutions to verify the identity of their customers. You only need to do this once as a first-time investor.
This article covers everything you need to know about KYC for mutual funds.
1. What is KYC?
Know Your Customer is a process of a financial entity verifying the identity of customers and evaluating their appropriateness, along with the prospects of unlawful purposes and practises.
Money laundering is one of the significant menaces in a country’s economy. Financial institutions and the government are always on the watch for such illegal activities. Mandating KYC formalities for banking or investment transactions is an effective way to prevent this.
2. Why is KYC Necessary for Mutual Fund Investments?
The primary objective of KYC is ensuring that deposits/investments are made in the name of a real person. Also, it helps in curbing black money. Hence, KYC procedure is something that all mutual fund investors have to adhere to via a KYC Registration Agency (KRA). A SEBI-registered entity, KRA holds investors’ information in a single database that all fund houses and intermediaries have access to. CAMS, NSE, and KDMS are a few agencies that most investors are familiar with.
SEBI later announced a common Know Your Client process to bring uniformity and consistency across SEBI-registered intermediaries. It became easy for portfolio managers, mutual fund companies, venture capital funds, and stockbrokers, among others to hinder duplication of KYC documents. This makes it easier for investors to comply with it.
3. How to Check if You are Already KYC-Compliant?
Mutual funds are one of the few ways to grow your wealth faster. As a diligently monitored investment scheme, KYC is the first step to mutual fund investment. You may be already KYC-compliant though. It is now effortless to check your KYC status online. You can go to the official website of CDSL Ventures Limited and enter your PAN to check if you are KYC compliant or not.
4. What are the Documents Required for KYC?
Investors need to submit the following documents along with their Know Your Client application form and a passport size photograph.
a. ID Proof:
PAN Card, Driving License, Passport copy, Voter ID, Aadhaar Card, or bank photo passbook.
b. Proof of Address:
Recent landline or mobile bill, electricity bill, passport copy, recent Demat account statement, latest bank passbook, ration card, Voter ID, rental agreement, Driving License, or Aadhaar card.
5. What are the Available KYC Procedures?
The mutual fund industry has nominated and authorised CDSL Ventures Limited to conduct the Know Your Customer procedure. You can complete the process, either offline or online.
i. Download the KYC application form from the CDSL Ventures website and fill in the details.
ii. Sign and submit a physical copy of the form to the specified authorities or intermediaries through whom you wish to invest in mutual funds.
iii. Attach the attested photocopies of ID proof, residence proof, and a passport size photo with the form.
b. Aadhar-Based Biometric
If you have Aadhaar card, then you can opt for Aadhaar-based KYC. You may request an official from the fund house or agency to visit you to collect the details. Submit a copy of your Aadhaar to the fund house or broker or distributor, and they will map your fingerprints on their scanner and link it to the Aadhaar database. By matching the fingerprint to that in the database, your details there will pop up. This means that they have validated your KYC before proceeding with your mutual fund investment.
6. How Can You Do KYC With ClearTax?
To do your KYC process manually, an investor needs to visit a KRA for the paperwork or send the documents by post, this can be tedious and will take a minimum of seven working days. However, you may complete your KYC online with ClearTax Invest, which will take only two minutes. The entire investment process can be completed within seven minutes. The company will not use the information you provide for any other purpose.
7. Advantages of Being KYC Compliant
The most significant advantage of being KYC compliant is that you don’t have to undergo the KYC verification process ever again. It is a one-time process and all fund houses in India require you to have completed your KYC verification before you can invest in mutual funds.
You can invest in any mutual fund scheme with any fund house after you have become KYC compliant. You can get started with your investment in mutual funds in just a few seconds on being KYC compliant.
In short, KYC should precede your mutual fund investment and is an essential criterion. Do this once as a first-time user, and you will be KYC-compliant for all your future mutual fund transactions.
FAQs (Frequently asked Questions)
As a tax-paying citizen, the Section-80c of the Indian Tax Act allows you
some breather –
a deduction of up to 150,000 from your total annual income.
How to check your KYC status online?
You may consider completing your KYC (Know Your Customer) before investing in mutual funds. You may have to submit documents such as PAN as an identity proof and your passport/driving license/Aadhaar/Voter ID as an address proof. You must submit self-attested copies of all these documents along with a couple of passport size photographs and show the originals for verification during IPV (In-Person Verification).
Complete KYC Online: You could complete the KYC online by visiting the website of a mutual fund house or KRA (KYC Registration Agency). You may consider filling up your details in the KYC form. You would be asked to upload self-attested copies of identity and address proof along with a passport size photograph. You must display originals for verification during IPV.
Check KYC Online: You may verify KYC status by visiting the website of the KRA. You will have to enter your PAN details to check the status of KYC.
How to check bank account KYC status?
You may consider visiting the website of your bank. You may find the link ‘Check KYC status’. You then enter the bank account number and the CAPTCHA to check the KYC status of your bank account. You may also log in to your internet banking account and check the bank account KYC status.
How to update KYC online?
You may want to change your name or permanent address in the digital KYC records. You would have to visit the eKYC portal of the KRA and login with your credentials. You then click on the link ‘‘Update KYC’. You then fill up the new details and upload the scanned copies of the relevant documents. You will have to complete the verification using the OTP on your registered mobile number. You then click on submit to complete the updation of KYC online.
What is KYC status?
KYC also called Know Your Customer is a method of identifying and verifying customers of a bank or investors in stocks, mutual funds and other investments. It is compulsory as per RBI norms for customers to complete KYC before accessing services or making transactions at banks.
You may consider KYC to be a protection against money laundering. It signifies that you are compliant with the Prevention of Money Laundering Act, 2002. You may find KYC status to be KYC Registered, KYC Under Process, KYC On-Hold, KYC Rejected and Not Available or your KYC record is not available with KRAs.
How to check director KYC status?
All current directors must update details as per the Income Tax Database. You may visit the MCA Portal to access the website mca.gov.in. You may enter the DIN (Director Identification Number) and click on submit. You then enter the PAN (Director) and click on submit to check director KYC status.
How to check KYC DIN status?
You may visit the MCA Portal. You then click on verify DIN PAN details of the Director and enter the DIN. You then press submit to check the KYC DIN status.
How to check KYC status of PAN Card?
You may consider visiting the website of CDSL (Central Depository Services Limited) and entering your PAN. If your KYC verification is complete you will see the updated status as MF-Verified by CVLMF. However, if your KYC status has not been verified you get to see status ‘Pending’. You may consider taking a print out of the page if necessary.
How to check the KYC status of mutual funds?
You may check the status of KYC at the website of the KRA (KYC Registration Agency). You then enter your PAN and the Captcha code to check the KYC status of mutual funds. However, if you have completed the KYC status without PAN you may enter your name, DOB and PAN-exempt category along with Captcha code to check the KYC status of mutual funds.
After your details are validated the portal will show you the date of initial KYC registration, the date of modification of your KYC records and the checkbox of IPV verification. You get to know the status of IPV verification through the checkbox.
How to check the KYC status of EPF?
You may check the KYC status of EPF using your UAN. You may visit the member e-sewa portal and login to your account using your credentials. You then click on the ‘View’ tab and the ‘UAN Card’ option.
The UAN Card will display ‘Yes’ in the KYC information row if your KYC details are updated in the EPF account.
How to check Aadhaar eKYC status?
You may visit the website of the financial entity which offers Aadhaar based KYC and login with your credentials. You enter your Aadhaar number to check the Aadhaar eKYC status.
How to verify KYC status in MCA?
- You may consider visiting the MCA Portal. You then navigate to MCA Services> DIN Services> Verify DIN.
- You could enter the DIN of the Director and click on the Submit button.
- You may enter the DIN in the box below verify DIN/DPIN-PAN details of the Director under DIN Services.
- You then enter the PAN of the Director and click on the ‘Submit’ button.
- You would see the name of the Director displayed as per the DIN database and the message, DIN details are matching with the Income Tax PAN database.
How to check CVL KYC status?
You may verify your KYC status by visiting the CVL KYC website and clicking on the button ‘Inquire on KYC’ after logging with your credentials. You will need to enter the Aadhaar Number to check the present status of your Aadhaar Based KYC Registration. You may consider repeating the same procedure for PAN-based registration. However, you may enter the PAN number instead of Aadhaar through this method.
How to check UAN KYC status?
You may consider checking the EPF KYC status using your UAN card. You must visit the e-Sewa Portal and login to your account with the right credentials. You then navigate to the ‘View’ tab and click on the ‘UAN card’ option.
You will find the UAN Card showing ‘Yes’ before the KYC information row if all your KYC details have been updated in the EPF account.
How to check Central KYC Status?
You may visit the KRA website which offers the facility to check the CKYC status. You may consider entering your PAN details. You enter the Captcha Code to check the Central KYC Status.