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What is KYC and How to Check the Status?

Last Update Date : April 30, 2019
Estimated Read Time: 5 min

KYC stands for ‘Know Your Customer’ which is a term used for Identification process of a Customer as a part of opening an account with any financial entity. You need to complete the KYC only once as a first-time investor.

Let us see what a KYC document is, how to obtain it and how to check the status in this guide by H&R Block India.

What is KYC?

KYC helps in establishing identity and address of an investor through the supporting documents as address proof, prescribed photo ID (e.g. PAN and Aadhaar card) and IPV, i.e. In-Person Verification. KYC compliance has been mandatory to prevent the laundering of money under the Prevention of Money Laundering Act, 2002.

The main aim of making KYC mandatory is to ensure that the investments or the deposits are made by a genuine person in his name and not by an impostor. It will also help solve the problems arising with black money. Therefore, it is highly important that the KYC process is followed by every mutual fund investor through a KYC Registration Agency (KRA), a SEBI-registered entity. KRA is responsible for holding your information in a single database which can be accessed by all the fund houses and intermediaries.

Why is KYC Compliance Necessary?

The KYC norm, introduced by the RBI in 2002, came into being in order to cut down the corruption practices such as money laundering, financing terrorist activities and fraud. Such illegal activities are mostly carried out through banks and financial institutions.

Financial institutions and banks can easily track their customers as well as their transaction trails owing to the KYC norms put in place. So much so that the commodity trading and insurance sectors have also adopted the KYC rules.

What is a KYC document?

If you are a mutual fund investor, you will have to produce several documents to the registration agencies so that you can complete your ‘Know Your Customer’ process. These documents include the KYC forms and identity as well as address proofs.

When you will apply for a new account for the first time, your KYC status will be checked. The verification of status is applicable for when you try to open a new phone connection or want to open another bank account, etc.

If you plan on investing in mutual funds, KYC compliance is mandatory. It is actually a pre-requisite for investing in mutual fund. To start with, the financial institution will give you a KYC form which needs to be duly-filled by you and then furnish all the relevant supporting documents. The KYC form and the other documents are your KYC documents.

You can produce any supporting documentation from the list given below:

Identity Proof

Usually, the KRA asks you for a copy of your PAN card, but there are some other documents which will be accepted as well. They are:

  • Voter ID
  • Passport
  • Driving Licence
  • Aadhaar Card

Address Proof

If you have submitted a document as an identity proof and it does not include your address, you can provide another valid document for furnishing your residential details. They may be:

  • Bank statement
  • Utility bills
  • Letter from your employer
  • Ration card

When you want to open an account with a brokerage or a fund house, you have to link it with your active bank account. For this process, you are required to provide a blank cheque wherein an IFSC number is mentioned using which the branch where your bank account belongs to can be identified.

These documents can also be used while opening a demat or trading account.

How to check if you are KYC Compliant?

As mutual fund is a strictly monitored investment scheme KYC in itself is the first step towards investing in mutual fund. However, it may so happen that you are already KYC-compliant. Follow the steps given below to check if you are KYC Compliant.

Step 1: To know the status of your KYC compliance online, you can visit the official website of CDSL Ventures Limited (1)

Step 2: Select KYC Inquiry, and you will be redirected to a new page

Step 3: Enter your PAN number in the relevant box or your name, date of birth and exempt category, if any. Enter the Captcha code and click on the Submit button

You will be shown the status of your KYC on the same page by scrolling down.

KYC Procedures

CDSL Ventures Limited is nominated and authorised for conducting the KYC procedure by the mutual fund industry. You can complete the procedure either online on the official website or offline.

Offline Process

Step 1: Download the application form from the website and fill in the details.

Step 2: Sign the form

Step 3: Attach the photocopies of the relevant documents and a passport size photo to the form

Step 4: Submit the form to the specified authorities or the intermediaries via who you want to invest in mutual funds.

Online Process

Step 1: Visit the KRA official website and create an account.

Step 2: Provide your Aadhaar card number and the registered mobile number. An OTP will be sent on your number for verification.

Step 3: Upload an e-Aadhaar self-attested copy and accept the declaration terms for e-KYC.

Aadhaar-based Biometric

You can opt for an Aadhaar based KYC if you have an Aadhaar card. You can request the fund house or agency official to visit your office or home and collect the necessary details. Submit a photocopy of your Aadhaar card to the agency or fund house through which they will map your fingerprints on their scanner and then link it to the Aadhaar database. This means that your KYC has been validated before you proceed with your mutual fund investment.

It is, therefore, safe to say that KYC is an important criterion and should be done before starting the transactions via banks and other financial institutions. Since this is a one-time process, you will not have to undergo through KYC compliance for the future transactions.

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Niteesh Singh
Niteesh is a Tax Researcher and Content Lead at H&R Block (India). He holds an MBA with a specialisation in BFSI domain. In his career spanning over six years, he has helped thousands of people understand taxes in a simple and effective manner. Outside work, Niteesh is an astronomy geek who is also involved in wildlife conservation activities.

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