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.
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 practices. 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.
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.
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.
Investors need to submit the following documents along with their Know Your Client application form and a passport size photograph.
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.
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.
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.