As an existing or potential investor, one might have heard about KYC Verification. But, not too many may understand the significance of it or how to get a KYC verification done for oneself. We herein explore the concept of KYC in greater detail and also delve into some of its nuances that most may not be familiar with.
What is KYC
KYC is an acronym for “Know Your Client” and its requirement arises from the Prevention of Money Laundering Bill of 1999. The objective of the bill was to ensure that every entity be it a bank, mutual fund or any other company dealing with clients’ money should be made accountable for knowing and verifying the identity of its customers. Conforming to this, every financial transaction in our country requires the proof of identity and the proof of address to be produced. Most of the banks, broking firms and companies accepting public deposits have a KYC application form attached to their own application forms which the client has to fill up while investing. But this KYC compliance is valid only for that entity and the customer has to repeat the process for different transactions with different entities.
For investments in Mutual Funds, the Association of Mutual Funds of India has simplified this process by facilitating a centralized platform through CDSL Ventures Ltd (CVL) to carry out a KYC compliance procedure which would be applicable to investments in all the Mutual Funds. With effect from 01 January 2011 it has been made mandatory for every investor desirous of investing in Mutual Funds to complete the KYC Process irrespective of the amount. Once done, the customer just has to attach a copy of the acknowledgement letter while investing for the first time with each Mutual Fund.
The KYC application form is available online and can be downloaded from –
The websites of any of the Mutual Funds
The AMFI website – www.amfiindia.com
CDSL Ventures website – www.cvlindia.com
Application forms are available under two categories-
Individuals– Resident individuals and Non-Resident Individuals
Non-Individuals–For Private/Public Ltd, partnerships, HUF, FIIs, societies, banks, trusts, govt. organizations etc.
KYC Documents required
- A recent passport size colour photograph
- Copy of PAN card
- Copy of address proof (list of valid documents is given in the form)
If the application form is submitted without complete or proper documentation, it is liable to be cancelled or rejected.
Where to submit Form
The application form along with the photocopy of the required documents can to be submitted at any of the nearest Points of Service (POS) outlets listed in the following URL.
The customer has to also carry the originals along for verification. In case the client is unable to personally visit the POS for some reason, he can send the documents through his representative.
KYC Verification and Processing
Once the documents are verified, the investor will receive a letter confirming KYC compliance. It may take 24 hours to a week to receive the letter. In the interim, the customer can check KYC status online using this URL.
The PAN no is to be entered, and if the processing is on, the status message “KYC STATUS PRESENT IN PROCESS” is displayed, and if the verification is complete, the status shows as “VERIFIED”.
On receiving Acknowledgement letter
Once the KYC acknowledgement letter is received, a copy of the same has to be sent to all the Mutual Funds where the customer has invested. All future investments in any mutual fund for the first time should be accompanied with a copy of this letter.
While there is no doubt that implementation of KYC for mutual fund investment protects investors’ interests, surely there is scope for further standardization. The KYC issued by CVL cannot be used for other transactions like opening a bank account, fixed deposit, or for real estate transactions. A common KYC application form for all investments could be a feasible solution