CDSL Ventures (CVL), a subsidiary of the Bombay Stock Exchange-promoted Central Depository Services (CDSL), has managed a 70 per cent market share in the KYC (Know Your Client) Registration Agency (KRA) segment.
A KRA is any entity that centrally maintains KYC records of investors on behalf of intermediaries such as brokers, asset management companies (AMCs) and depositories. It is estimated about 1.5 million client records have been created in the KRA system since introduction of the concept in January. Of these, about 1.1 million accounts are with CVL and about 400,000 have gone to NSDL Database Management (NDML). While DotEx, latest entrant in this space, has managed about 25,000 accounts.
Interestingly, NDML’s parent company, National Securities Depository (NSDL), is a market leader in the depository segment.
|VYING FOR CLIENTS
Among the three KRAs, CVL has the highest KYC records at present
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|Source: Industry players
Industry players said CVL managed its 70 per cent share thanks to its huge database of mutual funds’ clients. It was the sole KYC agency before the new system was introduced by the Securities and Exchange Board of India (Sebi) in January 2012. At present, there are three KRA agencies registered with Sebi. NDML is fully owned by NSDL, which was promoted by IDBI Bank, SUUTI and the National Stock Exchange (NSE). DotEx is a fully owned subsidiary of NSE.
Under the new KRA system, clients of all Sebi-regulated entities, including AMCs, portfolio management schemes and equity brokers now have a common KYC base. All existing client records will be gradually moved to the KRA system after all the information and documentation required under the new system is complete. A Sebi circular in April said KYC details of any client who carried out a transaction between April 16 and June 15 will need to be uploaded on the KRA system by August 31. Data of clients that transact in subsequent months will also have to be uploaded, in line with the time slabs set by the regulator.
Currently, KRAs charge intermediaries about Rs 30 as one-time uploading (creation) charge, which includes the warehousing charge and about Rs 35 as fee for use (download) of KYC data by any other intermediary which registers the investor as its client. Choosing among the three KRAs for uploading client information is at the intermediaries' discretion. Industry players said there was no price war and intermediaries chose KRAs based on service turnaround time and past relationship. By March 2013, KYC information of all active clients will be moved to the new KRA system.
Going ahead, NDML is likely to benefit from NSDL's dominance in the depository space, with 10.2 million demat accounts. CVL could gain when it comes to transferring the four million mutual fund client records it has and also from CDSL's eight million demat accounts. To be sure, a lot of these will be the same investors, who will do KYC only once.
The new KRA system benefits investors, as it enables them to switch brokers or AMCs without undergoing the tedious KYC process again and again. Intermediaries benefit on back-office costs, as clients' KYC documents get stored centrally with the KRA, which otherwise they had to maintain for 10 years.