Compulsory KYC compliance for all investment sizes in mutual funds
Ravi Samalad 23 August 2010

AMFI committee has asked fund houses to implement KYC norms for all investments below Rs50,000 who invest via channel distributors from 1st October.

The Association of Mutual Funds in India (AMFI) committee on know your customer (KYC) has asked mutual fund houses to initiate KYC procedure for all investments size, doing away with the current threshold limit of Rs50,000.
The AMFI KYC committee has submitted its detailed suggestions to the market regulator Securities and Exchange Board of India (SEBI) for bringing down the size of investments from Rs50,000 to nil for all investor types in a phased manner. Currently, the proposal is under SEBI's consideration. However, the AMFI board has given a go-ahead to all fund houses to implement the norms from 1 October 2010. 

These norms will initially be only applicable to all non-individual investors, non-resident Indian (NRIs), and channel investors. This category includes corporate, partnership firms, trusts, Hindu Undivided Family (HUF), NRIs and investors coming through channel distributors. Channel distributors are those who facilitate buying and selling of mutual fund units via online channels.

Currently people investing Rs50,000 and above are required to comply with know your customer (KYC) norms. As of now, domestic retail investors are required to provide a copy of residential proof, PAN card (which is compulsory) and one photograph to complete the KYC process.

"KYC should be seen in a larger context of national security and terrorist financing. However difficult it may be, implementing KYC will always be beneficial for both our economy and our country and its people. Just a day before, we all read that SEBI required stockbrokers to get income details such as tax returns, salary slips and bank account statements of the investors. Compliance requirements are only going to get tighter as we move forward and I see these as steps in the right direction from AMFI," said Rajesh Krishnamoorthy, managing director of iFAST Financial.

However, some players believe that this new move will be another blow to the mutual fund industry. "Distributors will be reluctant to service small investors who invest Rs1, 000 to Rs2,000 in systematic investment plans (SIPs). It is very difficult to follow KYC procedures for non-resident Indians (NRIs) because they do not possess most of these documents. They (NRIs) are worried about sending original documents for verification by courier or by post. So most of these NRIs take the SIP route by investing Rs25,000 to Rs30,000 per month to avoid KYC. It will be difficult for fund houses as well as NRIs," said Sandeep Chimanlal Vasa, chartered financial planner (CFP), Total Wealth Management.

The decision on a threshold limit for individual investors will be taken after getting feedback from SEBI. Industry players believe that this limit could be around Rs5,000 to Rs10,000.

1 decade ago
Under KYC one gives details of PAN. It is responsibility of Tax department to trace sources of funds in MF. Under AIR the fund house is required to furnish details of all investments above Rs. 2 lacs (single transaction). AIR norms can be modified to get details. I would not be comfortable with giving income details to a broker. It is like publishing ones income details in newspaper. How can we trust that income details are nor miss used. Like our mobile number income details would find buyers. SEBI needs to do a rethink.
1 decade ago
hahhhhhhaaaaaa @rajesh krisnamoorthy ""KYC should be seen in a larger context of national security and terrorist financing. "
do terrorists invest in such small sums like 500 sip or 49000 lumpsum ? Do they need TO INVEST small money like that for their retirement benefit? Whats ur larger context picture lol
jignesh n vyas
1 decade ago
kyc for mf investor is ok but problem in small investment like 500 or 1000 sip or 5000 to 10000 rs investment. Investor have only one number to invest in all product. Investor all reday given pan number . It is goverment responsibility to check income sorce of investore.
jayesh Pattani
1 decade ago
KYC for MF Investor is OK but Share Brokers' Responsibility to check Income Source of Investors', not an advisable step it is government's responsibility when share Investors have KYC.
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