SEBI eases KYC validation norms, does away with Aadhaar-PAN linking for MF investors. Details here

The Securities and Exchange Board of India (Sebi) has simplified the know your customer (KYC) norms for investors, and has done away with the mandatory requirement of linking Aadhaar and permanent account number (PAN) for mutual funds investors.

The market regulator, in a circular issued on May 14, said the changes it had announced in relation to the KYC process on October 12 are now being eased.

“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," it said in the latest circular.

KCY record in official databases to be considered ‘validated’

In a key announcement, the SEBI circular noted that KYC details as found in official databases such as Income Tax Department records on PAN, Aadhaar and Digilocker – shall be considered as “validated records” by KYC registration agencies (KRAs).

The circular further noted that KRAs are required to verify KYC records such as PAN, name, and address “within two days” of receiving them.

The changes have been made to “protect the interests of investors in securities” and to promote the development of the securities market, Sebi said. The intermediaries are required to implement the changes from May 31, 2024 onwards, it added.

What is KYC-validated status?

If the investor’s KYC has been completed based on Aadhaar, and the mobile number and email ID are linked to the Aadhaar number, then the KYC status is considered as validated by a registration agency.

However, if the KYC has been completed using a valid identity document, other than Aadhaar, then it would be considered as KYC-registered and not KYC-validated.

While KYC-validated investors can transact through any fund house, those whose status is KYC-registered are restricted to transact only through those fund houses where they have investments.