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  • Key takeaways
  • What is KYC
  • New KYC statuses explained
  • SEBI’s KYC updates
  • Conclusion
  • Frequently asked questions

How to Submit KYC for Mutual Fund Investments

Your guide to the latest mutual fund KYC requirements and changes

Rs. 500 SIP = Rs. 10 L+ in 15 yrs. Start your journey today

Article 11

If you have invested in mutual funds, then you probably must have heard about Know Your Customer or, in short, KYC regulations. It is essentially an obligatory process adopted by financial institutions, such as banks and mutual fund houses, with the aim of ensuring that customers' identities are duly verified. This allows only the participation of genuine investors in financial markets, something that helps the authorities prevent fraud and other related illegal activities.

Recently, the Securities and Exchange Board of India brought some key changes in the KYC process, particularly for mutual fund investors. If you are wondering what these changes mean for you, let us break them down in simple terms.

Key takeaways

  • "KYC Registered" allows access to only existing investments, while "KYC Validated" offers full access after linking PAN and Aadhaar.
  • Non-Resident Indians can invest without additional documents until April 30, 2025.
  • PAN-Aadhaar linking is no longer mandatory for "KYC Registered" status, but required for "KYC Validated." status

What is KYC?

In simple terms, KYC is a verification process wherein investors have to furnish the necessary documents like Aadhaar, PAN, and their proof of address in order to prove one's identity. This needs to be done for opening accounts with banks, stock brokers, and mutual fund houses. Once the KYC is completed and then approved, investors can start investing in financial products such as mutual funds.

New KYC statuses explained

Your KYC status is integral to your mutual fund investment journey. Here are the different categories in this regard:

  • KYC validated: An investor gets a ‘KYC validated’ status when he or she has completed his or her KYC. This is normally done by linking his or her Aadhaar and PAN together. They have no restrictions and can invest freely across all mutual funds.
  • KYC registered: If your status is "KYC registered" then you may face some restrictions. You can still be allowed to reinvest in mutual funds that you may already possess, but for further investments with different AMCs, you might need to resubmit your KYC information along with your Aadhaar.
  • On hold: Investors with an “on hold” status face heavier restrictions. They cannot make a new investment or any transactions. However in certain special circumstances, they could be allowed to only redeem their previous investments. If your KYC is "on hold" it is better to update your details as soon as possible to get complete access.

SEBI’s KYC updates

SEBI has recently introduced several key changes to the KYC process. These updates affect both resident and non-resident investors. Here are a few of the major ones you should know about:

  • KYC for NRIs: NRIs who are "KYC Registered" can continue to invest in mutual funds with no additional documentation till April 30, 2025. The move allows more flexibility for NRIs while investing from beyond the border.
  • Aadhaar linking for new investments: From the beginning of the 2024-25 financial year, all investors are required to update their KYC with Aadhaar for buying new mutual fund units.
  • PAN and aadhaar linking: In a major reprieve for a large number of investors, SEBI has waived the linkage of PAN and Aadhaar for those seeking to attain "KYC Registered" status. Before this the linkage of these two documents was mandatory for KYC completion and thousands of accounts had been put “on hold”. However now for "KYC Validated" status, PAN-Aadhaar linkage will still be required.
  • Simplified KYC validation: The earlier norms required the investors to validate their mobile number and also their email ID to complete their KYC. It has been simplified now, where either the mobile number or email ID is sufficient to validate an investor's KYC by the SEBI.

Conclusion

In October 2023, SEBI introduced a rule requiring mutual fund investors to link their PAN with Aadhaar by March 2024. Failure to do so would result in KYC being put “on hold,” affecting over 13 million accounts. However, SEBI revised these rules in May 2024, allowing investors to achieve “KYC Registered” status without linking PAN and Aadhaar, provided they submit other valid documents like a passport, voter ID, or driving licence. Investors seeking “KYC Validated” status must still link PAN and Aadhaar. These changes make it easier for both resident and NRI investors to update and maintain their mutual fund accounts.

Simplify your investments with Bajaj Finance’s user-friendly online mutual fund platform. Explore over 1,000 mutual fund schemes, compare mutual funds, and use the Mutual Fund Calculator. Visit today to make investing in mutual funds rewarding in the long run.

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Frequently asked questions

What is the difference between "KYC Registered" and "KYC Validated" status?

"KYC Registered" allows investments in existing funds but may require Aadhaar for new ones. "KYC Validated" offers unrestricted investment across all funds after linking Aadhaar and PAN.

Do NRIs need to update KYC for mutual funds?

NRIs with "KYC Registered" status can invest without extra documents until April 30, 2025. Post which some extra documentation may be required for unhinged access to mutual fund investments.

Is linking PAN and Aadhaar mandatory for mutual funds?

No, SEBI no longer requires PAN-Aadhaar linking for "KYC Registered" status, but it is needed for "KYC Validated" status.

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Disclaimer

Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed.

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.

Disclaimer

Bajaj Finance Limited ("BFL") is registered with the Association of Mutual Funds in India ("AMFI") as a distributor of third party Mutual Funds (shortly referred as 'Mutual Funds) with ARN No. 90319

BFL does NOT:

(i) provide investment advisory services in any manner or form.

(ii) carry customized/personalized suitability assessment.

(iii) carry independent research or analysis, including on any Mutual Fund schemes or other investments; and provide any guarantee of return on investment.

In addition to displaying the Mutual fund products of Asset Management Companies, some general information is sourced from third parties, is also displayed on As-is basis, which should NOT be construed as any solicitation or attempt to effect transactions in securities or the rendering any investment advice. Mutual Funds are subject to market risks, including loss of principal amount and Investor should read all Scheme/Offer related documents carefully. The NAV of units issued under the Schemes of mutual funds can go up or down depending on the factors and forces affecting capital markets and may also be affected by changes in the general level of interest rates. The NAV of the units issued under the scheme may be affected, inter-alia by changes in the interest rates, trading volumes, settlement periods, transfer procedures and performance of individual securities forming part of the Mutual Fund. The NAV will inter-alia be exposed to Price/Interest Rate Risk and Credit Risk. Past performance of any scheme of the Mutual fund do not indicate the future performance of the Schemes of the Mutual Fund. BFL shall not be responsible or liable for any loss or shortfall incurred by the investors. There may be other/better alternatives to the investment avenues displayed by BFL. Hence, the final investment decision shall at all times exclusively remain with the investor alone and BFL shall not be liable or responsible for any consequences thereof.

Investment by a person residing outside the territorial jurisdiction of India is not acceptable nor permitted.

Disclaimer on Risk-O-Meter:

Investors are advised before investing to evaluate a scheme not only on the basis of the Product labeling (including the Riskometer) but also on other quantitative and qualitative factors such as performance, portfolio, fund managers, asset manager, etc, and shall also consult their Professional advisors, if they are unsure about the suitability of the scheme before investing.


Disclosure
: Bajaj Finance Limited (BFL) is a distributor of Mutual Funds with ARN - 90319 and distributes mutual funds of Bajaj Finance Asset Management Limited (BFSAMC). BFL receives commission towards distribution of mutual fund products. BFSAMC is a group company of BFL, carrying business on arm’s length basis without any conflict of interest and in accordance with the prevailing law / regulation.

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