DYK: you can use e-KYC to start investing in mutual funds

Reliance Capital Asset Management Co. Ltd has now taken a step towards paperless KYC. This is how it works

One of the impediments to investing in mutual funds (MFs) is the clunky paperwork required. Lengthy paperwork for the know-your-customer (KYC) process and submission of several documents as proof takes up a lot of time. And although the KYC process is now centralised and has become a one-time procedure, thanks to the emergence of KYC registration agencies (KRA), you still cannot escape paperwork.

The Reserve Bank of India (RBI) had, however, rolled out e-KYC in March 2014 for opening of bank accounts. This could be used for other financial assets as well. However, MFs have been slow in taking it up. Reliance Capital Asset Management Co. Ltd has now taken a step towards paperless KYC. This is how it works.

UPLOAD E-FORMS

If you are investing in MFs for the first time and wish to do so through Reliance Capital AMC, you need to download the KYC form from the fund house’s website. Fill the form, sign and then upload it on its website. You also need to scan and upload the supporting physical documents. The fund house will then schedule a video conference with you over the Internet to do an in-person verification (IPV).

Remember, IPV is now a mandatory requirement as per the KYC procedure and which you have to adhere to when investing in MFs. In January 2012, the capital market regulator, Securities and Exchange Board of India (Sebi) had said that existing MF investors who wished to invest in fund houses where they had not invested before (effective November 2012) would need to get an IPV done, even if they were already KYC compliant. IPV is a process whereby your fund house gets to verify that you are alive, by virtue of you being physically present.

Once the IPV is done, the fund house will send you a confirmation. You can now invest in not just Reliance AMC schemes but any MF or through any stock market intermediary.

WHAT ABOUT PHYSICAL DOCUMENTS?

You will need to send the KYC form (but not the supporting documents) to the fund house since your physical signature is still required. In the meantime, you can start buying MF units, but you cannot sell them till the fund house gets your physical documents.

RBI kick-started the e-KYC process using e-Aadhaar validation by allowing banks to open accounts simply by taking a prospective customer’s Aadhaar number and collecting her fingerprints on a device that is connected to the Unique Identification Authority of India systems. Once the fingerprints and Aadhaar number are verified, the customer can open a bank account.

While fund houses are also in talks with Sebi to allow investors to invest in MFs by simply using the Aadhaar number, a truly paperless e-KYC is still some time away.