KYC Requirements — CKYC, In-Person Verification
Definition
Know Your Customer (KYC) is the mandatory identity and address verification process that every mutual fund investor must complete before making their first investment. KYC is governed by SEBI regulations and the Prevention of Money Laundering Act (PMLA), and is facilitated through KYC Registration Agencies (KRAs) and the Central KYC (CKYC) registry maintained by CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest of India).
In Simple Words
KYC is the gatekeeper of every mutual fund transaction — no KYC, no investment. With the evolution of CKYC and eKYC, the process has become far smoother than the paperwork-heavy system of earlier years, though compliance requirements are stricter than ever. Here is the complete picture. Every investor must be KYC-compliant before their first mutual fund purchase. The primary document is PAN (Permanent Account Number) — this is mandatory for all investments. However, there is an important exception: for investments below ₹50,000 in a rolling 12-month period, PAN is not required (PAN-exempt category). In such cases, any valid government-issued photo ID works. CKYC (Central KYC) is now the primary KYC mechanism for the financial sector. Once an investor completes KYC with any financial institution (bank, AMC, broker), the KYC record is uploaded to the CKYC registry maintained by CERSAI with a unique 14-digit KYC Identification Number (KIN). Any other financial entity can verify KYC using this KIN — no need to submit documents again. KRA-KYC (through KYC Registration Agencies like CAMS KRA, KFintech KRA) also remains in operation for the securities market. eKYC uses Aadhaar-based authentication (OTP or biometric) for quick verification, and SEBI permits eKYC investments of up to ₹50,000 per year per AMC for individuals. For higher amounts, full KYC is required. In-Person Verification (IPV) is an important step — it confirms that the person submitting the application is indeed the same person whose documents are attached. Notably, IPV can now be completed via video KYC as well, in addition to physical verification. SEBI allows AMFI-registered distributors to perform IPV, which is a significant operational advantage for MFDs and sub-brokers.
Real-Life Scenario
Consider the case of Deepak, a new MFD in Jaipur, onboarding his first client — Mrs. Kamla Sharma, a retired teacher who wants to invest ₹3,00,000 in a debt fund. Deepak collects her PAN card copy, Aadhaar card, a cancelled cheque, and a passport-size photo. He fills the KYC form and performs In-Person Verification (IPV) himself — verifying Mrs. Sharma's original documents, stamping "IPV done" on the form, signing it with his AMFI Registration Number (ARN), and noting the date. Alternatively, Deepak could complete IPV via video KYC if an in-person meeting is not feasible. The KYC application goes to the CKYC registry via the KRA (say, CAMS KRA). Within 2-3 days, her KYC is verified and a 14-digit KIN (KYC Identification Number) is generated. Now, if Mrs. Sharma wants to open a demat account or invest with another AMC, she simply provides her KIN — no need to submit documents again. Deepak also has a client, Ravi, a college student who wants to start a small SIP of ₹500/month. Since Ravi's total investment will be under ₹50,000 in the year, Deepak processes it as PAN-exempt using Ravi's Aadhaar card for eKYC.
Key Points to Remember
Frequently Asked Questions
Test Your Knowledge
4 questions to check your understanding
An investor wants to invest ₹40,000 in a mutual fund through eKYC. Which of the following is correct?
Summary Notes
KYC = mandatory gatekeeper — PAN is primary document; PAN exempt only for investments under ₹50,000/year
CKYC gives a 14-digit KIN valid across all financial sectors; maintained by CERSAI
eKYC (Aadhaar-based) capped at ₹50,000 per AMC per year — beyond this, full KYC is mandatory
Distributors with AMFI registration can perform IPV (physically or via video KYC) — a key operational advantage for sub-brokers
KYC must be completed BEFORE the first transaction — no allotment to non-KYC investors
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Frequently asked questions
Should I recommend NFOs to my clients over existing funds?
Not automatically. An NFO makes sense only if it offers a genuinely new investment strategy or category not available in existing schemes. If a similar fund with a 5-year track record already exists, the existing fund is usually a better choice because it has a proven performance history. Distributors should avoid the common pitfall of pushing NFOs solely for higher initial commissions.
What happens if the NFO does not collect enough money?
SEBI requires a minimum subscription of ₹10 crore for open-ended schemes and ₹20 crore for close-ended schemes. If the AMC fails to collect this minimum amount during the NFO period, the entire amount collected must be refunded to investors within 5 business days. The scheme is then considered to have failed and does not launch.
Can I invest in an NFO through SIP?
No, SIP cannot be started during the NFO period. SIP can only begin after the scheme reopens for continuous sale and repurchase post-NFO. During the NFO window, only lumpsum investments are accepted.
Is there an exit load during the NFO period?
There is no exit load during the NFO period because redemptions are not allowed until the scheme reopens. For open-ended funds, once the scheme reopens (typically within 5 business days of allotment), the standard exit load structure applies as mentioned in the SID.
What is the difference between NFO price and NAV?
The NFO price is the fixed face value (₹10) at which units are offered during the subscription window. NAV (Net Asset Value) is the daily computed per-unit value once the scheme is operational. After the NFO, units are bought and sold at NAV, not face value. A fund with NAV ₹500 is not "expensive" — it simply means the fund has grown over time.
Can I do KYC for my client or does the client have to do it themselves?
An AMFI-registered distributor can facilitate the KYC process — collecting documents, filling the form, and performing In-Person Verification (IPV), either physically or via video KYC. However, the client must sign the KYC form themselves. Distributors cannot forge or sign on behalf of the client. The IPV privilege is a significant advantage for distributors.
What is the difference between KRA KYC and CKYC?
KRA KYC is specific to the securities market (mutual funds, broking, etc.) and is maintained by KYC Registration Agencies like CAMS KRA or KFintech KRA. CKYC is a central registry that covers all financial sectors — banking, insurance, mutual funds, NBFCs — and is maintained by CERSAI. The industry is progressively moving towards CKYC as the unified standard.
What if a client has done KYC with a bank — do they need to do it again for mutual funds?
If the client has completed CKYC with their bank and has a KIN (KYC Identification Number), they do not need to redo the full KYC process. The AMC/RTA can pull their KYC record from the CKYC registry using the KIN. However, if only KRA KYC was done, it may need to be migrated or re-verified depending on the AMC's requirements.
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