 "Sebi may lift online investment cap on MFs")
Market regulator Securities and Exchange Board of India (Sebi) is considering doing away with the yearly investment limit of Rs 50,000 per fund house through the online route.
Also, KYC registration agencies (KRAs) are developing a system to accept applications online without the need of a PAN card, said a person aware of the development. PAN is permanent account number — allotted by the income tax department. KYC is the process of a business verifying the identity of its clients.
According to Sebi guidelines released two months ago, investors can fulfil KYC norms online by using their Aadhaar card only. (Aadhaar is an individual identification number issued by the Unique Identification Authority of India (UIDAI) on behalf of the central government. This number serves as a proof of identity and address, anywhere in India.) But, the online KYC process at mutual fund houses is still based on PAN card details. Five KRAs are registered with Sebi at present.
"Aadhaar as a proof of residence fulfils all KYC requirements that we normally have. Doing away with the limit for investment will ease entry of new investors to the sector and benefit all stakeholders," said Rajiv Shastri, chief executive, Peerless Mutual Fund.
The issue assumes significance since the lower House (or Lok Sabha) of parliament had passed the Aadhaar (targeted delivery of financial and other subsidies, benefits, and services) Bill two months ago.
The Bill is aimed at better targeting of subsidies and identifying a person receiving a subsidy or service.
For online KYC through Aadhaar, the verification process is completed by entering a one-time password (OTP) received on the investor's mobile or e-mail address registered with UIDAI.
There are two conditions for online KYC which is based on Aadhaar. One, the amount invested should not exceed Rs 50,000 per financial year per mutual fund. Two, the payment has to be through an electronic transfer from the investor's bank account. "The information downloaded from UIDAI shall be considered as sufficient information for the purpose of KYC verification," said a Sebi circular in January.
"The removal of the Rs 50,000 limit can be of great help from the point of view of extending the reach of mutual funds and increasing the sector's penetration into smaller towns," said the operations head of an asset management company, on the condition of anonymity. But he said that doing away with the limit, may not immediately translate into huge inflows.
Those using the offline route for investments in mutual funds are required to submit documents other than Aadhaar, such as PAN card, for KYC. Investors have to submit their documents at a point of service, or KRA, and do an in-person verification as well. However, PAN is not required for systematic investment plans, or SIPs, that do not exceed Rs 50,000 in a financial year (called micro-SIPs). In this case, a copy of Aadhaar card, voter ID or driving licence needs to be submitted and cross-checked with the originals.
KYC procedures for the capital market have already been streamlined and a single KYC can be used by all financial intermediaries including brokers and mutual funds.
