In a relief for mutual fund investors, the Securities and Exchange Board of India (SEBI) has relaxed Know Your Customer (KYC) guidelines.

The markets regulator has done away with the requirement of linking permanent account number (PAN) with Aadhaar to get “KYC-registered” status for mutual fund transactions. However, PAN-Aadhaar linking is still required for “KYC-validated” status.

The markets regulator has made the modification based on feedback received from stakeholders.

“Based on the feedback received from the stakeholders in the securities market and for ease of transacting by clients, the provisions of the Master Circular dated October 12, 2023, have been reviewed and it has been decided to simplify the risk management framework,” SEBI said in a circular dated May 14, 2024.

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SEBI has also asked Exchanges/Depositories/concerned intermediaries to complete the necessary technical changes in their systems by May 31, 2024.

What has changed?

Old Rule

Earlier, if PAN and Aadhaar were not linked, KYC status was on hold. However, if PAN-Aadhaar were not linked and if you did Aadhaar-based KYC then the status was “KYC-registered”.

On 12th October 2023, the capital markets regulator had released a master circular on KYC regulations, mandating mutual fund investors to re-do their KYC by March 31, 2024 if it was not done based on officially valid documents such as Aadhaar, Passport or a voter ID card.

Prior to October 2023 circular, mutual fund investors could do their KYC even by submitting a bank passbook or bank account statement as their proof of address.

Further, as a part of the risk management framework, the previous rules required KRAs to verify three attributes of records of all clients within two days of receiving information:

• PAN (including PAN-Aadhaar linkage)
• Name
• Address

Also Read: Has Your Mutual Fund KYC Status Changed? AMFI Explains What To Do

The rules announced by SEBI in October reportedly affected more than 13 million accounts where initial KYC was done by using non-Aadhaar and non-official valid documents.

New Rule

Now, PAN-Aadhaar linking is not required for “KYC-registered” status. However, if you want “KYC-validated” status, PAN-Aadhaar linking is required even now.

The revised rule asks KRAs to verify only the PAN, Name and Address of clients within two days of receipt of KYC records for “KYC-registered” status.

Also, for KYC-registered status, you can use other official valid documents such as Aadhaar, passport, driving license, or voter ID card.

However, investors can now get KYC-validated status only if their PAN-Aadhaar are linked and their PAN, Name and Address records are verified by KRAs with official databases.

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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing in market-linked instruments.