Good News for Mutual Fund Investors; Accounts won’t get blocked on breaching KYC deadline

When the deadline for obtaining a fresh KYC (Know Your Customer) was only some 35 hours away, the obligation to obtain a new KYC in order to continue operating mutual fund folios was lifted, but only for current investors.

This was done in response to a written communication provided by CDSL Ventures, one of the KYC registration providers, to mutual fund distributors on March 28. Investors are not required to complete the re-KYC by March 31 in order to continue trading in mutual funds. In fact, failure to do so will now result in their KYC being ‘put on hold’ rather than being blocked from any transactions.

This means that their transactions, such as SIP (systematic investment plans), SWP (systematic withdrawal plans), and STP (systematic transfer plans), would not be prohibited due to a failure to re-do the KYC.

Although existing mutual fund investors might take a sigh of relief, it does not provide any comfort to new investors.

“However, these investors would need to undergo fresh KYC as per the extant framework for getting onboard with any new intermediary,” according to the above-mentioned email.

Particularly, mutual fund distributors were previously instructed to ensure that investors whose KYC was not completed using officially valid papers like an aadhaar and passport would be barred from utilizing their accounts after March 31 unless the KYC was re-done.

These instructions came from CAMS and KFin Technologies, mutual fund registrars and transfer agents (RTAs). However, with this current change of events, investors need not be concerned at least for the time being.