MFs seek KYC easing, in line with insurance sector

A Budget proposal has irked MF officials. The proposal said a customer could buy an insurance policy if he/she had a bank know-your-customer. It didn't include mutual funds

The mutual fund (MF) sector has again indicated that compared to the insurance sector, it is being treated in a step-motherly manner. This time, it is a Budget proposal that has irked officials in the sector. The proposal said a customer could buy an insurance policy if he/she had a bank KYC (know-your-customer). It didn’t include MFs.

The MF industry has been seeking a similar dispensation. It was hopeful this time the government would bring about an easy KYC process for MFs, too. The finance minister’s visit here to launch the Rajiv Gandhi Equity Savings Scheme a few weeks before the Budget had fuelled optimism among officials. This was because the minister had frankly said despite having a bank account, a customer couldn’t have a demat account because of many complications.

Within hours of the finance minister’s Budget speech, in a letter to the Securities and Exchange Board of India (Sebi), the Association of Mutual Funds in India said, “A bank KYC shall be accepted for buying an insurance policy and there is no need to do a separate KYC for the same. We have been representing a similar dispensation for the mutual fund industry, since mutual funds accept all investments by cheque(s) only.” It requested Sebi to review the matter to give fund houses a similar dispensation so that investing in MFs becomes hassle-free.

Officials said KYC norms resulted in many hurdles for the sector. “On several occasions, it is practically difficult to get the KYC done. And, with revisions in KYC norms such as ‘in personal verification’, customers — existing and potential  — are least bothered about our products,” said the chief executive of a mid-sized fund house, on condition of anonymity.

Earlier, executives had told Business Standard changes in the KYC norms had led to confusion among investors. “Allowing only insurance players to have this facility is not fair. There should be a level playing field for all financial products. MFs, in particular, are one of the best and cheapest products for investors. But complications arising out of KYC and other regulations are not letting the sector take off,” said the chief marketing officer of a private bank-sponsored fund house.