The KYC mess: agencies want to simplify process to validate

Controversy and compliance violations around KYC, a process that is almost viewed by most has a necessary evil, has come to engulf our financial world, where the rush to achieve corporate growth often finds itself at a pole opposite to that of a strict regulator. Now, in a bid to ease the KYC process for investors due to new guidelines in force from April 1, agencies have offered new guidelines to make the process simple, reported The Economic Times.

These KYC registration agencies are CDSL Ventures (CVL), NSDL Database Management (NDML), CAMS, Karvy, and Dotex have come with guidelines to simplify the process.

Incidentally, all KRAs combined have a database of 10.83 crore investors. This database is effective as on March 31, 2024.

Fortunately, about 73% of the KYC records are catgorised under ‘KYC Validated’ status. About 15% fall under ‘KYC Registered’ status and the rest 12% have been labelled as ‘KYC On-Hold’.

Those who fall under the first basket of 73%, in other words, whose KYC is validated, can make any transaction without hindrance and don’t need to submit their documents again.

Those who comes under ‘KYC Registered’ can continue with their SIPs with asset management companies. However, these set of investors have to submit KYC documents to open a new account or a new folio with a new fund house or, in fact, any intermediary registered with the Sebi. These investors have to upgraded into ‘KYC Validated’.

But those who fall under the ‘KYC On Hold’ have to complete the process by submitting ‘PAN-Aadhaar Seeding’ in income tax records to render PAN operational.

Once this is done, the person/investor has to share the updated email and mobile number with any of the chosen intermediaries to update the same in their records and lodge a modification request with the KRA. The process of validation is complete only when the KYC records are registered as validated.

The update has come against the backdrop of investors and MF distributors expressing concerns. Acting on Sebi directions, KYC registration agencies divided the KYC records into three clearly distinct buckets to present an umambiguous picture.

CDSL Ventures, Computer Age Management Services, National Stock Exchange, and Karvy have told the media that they have earmarked help desks and call centres. These are for investors who can phone for any help and guidance.

“KRAs have also been sending communications to intermediaries to update them about progress on the KYC status verification exercise. KRAS also send communication to investors on any access/ modification to their KYC record,” the agencies have said told the media.

AMCs have also stepped up efforts to make investors aware about the significance and need of KYC and act on it.

Following Sebi action, MFs were prevented from enlisting investors whose KYC were not validated.

AMFI has said if they want investors can validate their KYC through any of the MF websites. Needless to say, they can also submit KYC documents offline.