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  • SEBI Guidelines for KYC Registration Agencies in India

  • The mechanics of running a mutual fund house comes with strict guidelines where the operations should be carried out within the established framework regulated by SEBI (Securities and Exchange Commission of India). This includes following the KYC procedures. Know Your Client or KYC as popularly known across the industry is the process of identifying a client before signing him/her as an investor under a specific fund. KYC norms mandate Financial Institutions and Financial Intermediaries to obtain and verify personal and contact information of their clients in accordance with the laid down norms.

    From January 2012, SEBI has introduced a common KYC application form to ensure uniformity in maintaining and processing information pertaining to investors in mutual funds. The process of verification also includes IPV (In Person Verification) for mutual funds. To make the process of collecting information more streamlined and central, a KRA (KYC Registration Agency) is entrusted with the responsibility of maintaining KYC records. Regardless of the amount invested, KYC is mandatory for all applications.

    The following types of transactions require verification in the mandated format.

    • New or Additional Purchases
    • Transactions such as Switching
    • SIP or MICRO SIP registration
    • STP Registration

    Role of KRA in KYC

    All KRAs are registered under the SEBI Regulations, 2011. As stated earlier, the primary role of this agency is to maintain KYC records on behalf of the intermediaries registered to do business in public space by the market regulator. To aid this function, a financial intermediary such as mutual fund will perform the KYC on investors and provide the details to the KRA. An intermediary has immediate access to the details by means of accessing it from the agency. This is done to ensure the process of verification does not have to be repeated when the client approaches an intermediary for investment.

    The following companies are the registered KRAs with SEBI.

    • CSDL Ventures Limited
    • DotEx International
    • Karvy
    • NDML (NSDL Database Management Limited)

    Guidelines for KYC Registration Agencies

    The KRA regulations issued by SEBI in 2011 guides the functions of these agencies. Specific details have been provided below.

    • Documents received by the intermediaries from their clients shall be safely stored and safeguarded by the agency. Such documents should be available for immediate retrieval when required.
    • The agency is required to store the original documents of the client supplied by the intermediary in physical as well as electronic form. The KYC information retrieval should happen within the specified time period.
    • Update in KYC information of the client should be communicated by the agency to all the intermediaries involved in providing investment services to the client in question.
    • There should be a well woven network among all the registered KRAs for smooth exchange of information within them.
    • After receiving the documents from the intermediary, the agency shall issue a letter of confirmation to the client and the status of KYC verification.

    Benefits of the KRA Route to KYC for clients and intermediaries

    The most visible benefit of registering the KYC details with an agency is that it facilitates passage of critical information through a single channel. It avoids duplication of information and ensures accuracy since it's all stored in a single database with limited access to retrieve and modify. It also saves the clients from the inconvenience of providing documentation every time they apply for a service with an intermediary. It also saves huge amounts of physical and virtual space for the intermediary since documents need not be stored on company resources for new clients. They can simply contact the agency to verify the client information.  

    GST rate of 18% applicable for all financial services effective July 1, 2017.

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