- 4/24/2024
New KYC Norms: What are the challenges investors have been facing? What are the possible solutions?
Mirae Asset Mutual Fund's Swarup Mohanty and FinFix Research and Analytics' Prableen Bajpai share views.
Mirae Asset Mutual Fund's Swarup Mohanty and FinFix Research and Analytics' Prableen Bajpai share views.
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TVTranscript
00:00Hi, thanks so much for joining in. You are watching The Mutual Fund Show on NDTV Profit
00:11and my name is Alex Mathew. This show is geared towards getting you better insight into your
00:16investments into mutual funds. But from the start of this month, a lot of you have been
00:22unable to transact and in fact, you have been restricted in some cases with regard to investing
00:28in new mutual fund schemes. All of this relates to changes in the norms related to KYC and
00:35we will talk about why that is. If you are unaware of this, then you are in the third
00:41of three camps as I see it of investors. The first is annoyed, the second is resigned and
00:48the third is blissfully unaware. But the bottom line is that you need to fix these issues
00:54and to that end, it is important to identify why these issues are cropping up in the first
00:59place. I am joined on this show by Swaroop Mohanty, the Chief Executive Officer of Mirai
01:06Asset Mutual Fund. Thank you so much Swaroop as always for taking the time. Let us talk
01:10about why this has occurred and what the context is and we will also try and get the mutual
01:16fund perspective because I am sure you guys are not happy with the implications in terms
01:20of flows. So first, why is this issue cropping up?
01:23Alex, first of all, thank you so much for having me on your show on such an important
01:29topic as we speak. But we mutual fund guys come with our own disclaimers. So let me put
01:34my disclaimer up first. There are two types of people, the lawmaker and the law follower.
01:39I am a law follower. So I am in the second category. I resigned to the fact that if something
01:44is laid down by law, I just follow it. And in this case, the ideology of considering
01:51that you have to move to a Aadhaar based KYC process is something which is proving to be
01:58a bottleneck because a lot of investors of the past had used other verification documents
02:03for their verified status. Now when you are asking them to again redo the process and
02:09move to another base, let me put the other perspective also that today the Aadhaar is
02:17the universally accepted KYC is a reality. So the new law now says that let's move to
02:23this process and that's where this thing of again having to redo your KYC process is proving
02:30to be a bit of an issue for many people in the market.
02:34Okay, let's talk about the various statuses because this is now quite a big debate on
02:40social media platforms. Everyone is wondering what is happening. If and you kind of explained
02:46this already, but I want to make this crystal clear. If you used another document, another
02:54you know validation document, identity proof like for example, a passport or a driving
03:00license or even a PAN card, you will need to do this again with the Aadhaar and that
03:07was something that kicked in on the 1st of April, but you fall into three categories
03:12as I understand it Swaroop, correct me if I'm wrong. Either you are verified in which
03:17case you have done an Aadhaar EKYC already and you are not supposed to do anything. You
03:23are registered in which case you have used if I'm not mistaken the PAN and you can continue
03:29to invest in existing folios, but you can't do fresh investments and the third is you
03:34are on hold. Can you explain the third? Yeah, so if you have not verified the respective
03:40documents or you have not been verified as you rightly pointed out, the first one is
03:44when you are validated. I mean you are see at the outset Alex, let's understand one thing
03:49why the Aadhaar because the Aadhaar is the only document that can be revalidated by the
03:54UADI or the concerned government authority. That's why the preference of the Aadhaar and
04:01now if you've used PAN or any other documents and you continue to invest, so there is this
04:06allowance of continuing to invest in the respective fund houses and those people will have issues
04:11in investing in new fund houses. That's where it comes in. The third one is where you are
04:16put on hold, meaning that your documentation is not in place as per the new verification
04:22process. It has a very simple way of doing it. Easier said than done for many, but it's
04:28very important that the investor now goes on to the respective websites. I think Amphi
04:32has just sent out a very interesting pamphlet which simplifies that whole thing. Go and
04:39first check your status on CVLKRA or on any of the other websites and as per your status
04:45which will read either you are validated or you are verified or you are on hold, then
04:50go about redoing the whole thing as per the instructions of your status.
04:55CVLKRA is essentially the place that you go. It's www.cvlkra.com and you have to enter your PAN
05:04number to identify… In the KYC status?
05:07Yeah, in the KYC status. And then the further steps beyond that. The question is, why couldn't
05:15this have been done better? Because as I understand it, Swaroop, a large number of investors,
05:20particularly the do-it-yourself investors, were completely unaware of this and they found
05:27out post the 1st of April when they tried to make a transaction and it failed for whatever
05:32reason. In certain cases, they have been unable to redeem as well, which is a bit of a problem
05:38because you are trying to, in certain cases, get money out of a liquid fund situationally.
05:43Anecdotally we found out that money was required. It's not available. This could have been
05:48better. Alex, I know many people will not like it when I say whatever I'm going to say. Finally,
05:55a lot of these laws come in to safeguard the person's money. And finally, it's the person's
06:01own money. And today, it is true that your Aadhaar is your first step to or your first
06:07kind of go-to method of safeguarding your own identity, your own verification process.
06:13And when that is put in place over the other documentation that you submitted, you can be
06:20of two things. Let me now safeguard my money and go the other way. Or I can then say, you know,
06:25there's a bit of a problem. Why am I being asked to do it? It is true that one has to always aspire
06:32to safeguard one's money. And today's digital world, you are then subject to a lot of, or you
06:39are prone to a lot of frauds that are happening as we speak. And it's in the selfish interest of
06:45the investor that they safeguard or create a moat of safety around the money that they have.
06:52And we are seeing instances where such frauds are happening. And hence, probably the regulator
06:58thought it is time to take this step or take the plunge of cleaning up this act.
07:02Now, every process can be done better. Let's be very honest on this. It is now this from a data
07:09of 4.3 crore portfolios is a huge task. There is no denying that. And I'm completely with people
07:17who are, say, the NRIs or probably senior citizens sitting out of smaller cities who are clueless
07:23as to why or how this has happened. But this is an essential step. And if it is to safeguard
07:29my own money, when I went and re-registered myself, I saw the process and it's not exactly
07:35easy for me who's part of the industry, who has had to do it. Sometimes the servers are down and
07:41I've gone through all that. But if I come from the single motive of how do I safeguard my own money
07:48in its truest form, then this is a necessary step is where I come from.
07:52Okay. Can the industry do anything to facilitate this? I'm asking from the perspective of
07:59making it easier for the groups of individuals that you've pointed out to. NRIs, I don't see
08:06how they're going to resolve a situation. Of course, they have valid documents, which they
08:10have to use to do the re-KYC, even if they don't have an Aadhaar. But old people, I would think,
08:17are going to find it difficult. So is there anything that the industry can do? And I also
08:22want to find, I'm curious, mutual funds would have seen quite a big impact in the kind of flows that
08:29they would normally get through lump sums in fresh folios. Is that going to be witnessed in
08:36the fund flows in the month of April? Alex, I think something which you referred to is
08:41very important and I'm of the camp that fresh inflows, whether it's impacted or not, is not
08:47the bigger issue. Redemption should not be stopped. That's something which we need to talk and address
08:54very quickly. Somebody needs money. As an industry, we've always taken pride of how liquid
08:59we are. In the entire COVID period, we paid each penny that was required. And this, if it's an
09:05hindrance, that is where our first sort of point of action should be. And the IMF is consistently
09:13talking to, say, beyond this. And I'm sure we will find a way forward. I mean, when a law is put,
09:19maybe some of these practical aspects were not discussed, but I think IMF is discussing that
09:25with the regulator. And I'm sure when we point out some valid reasons, there is no reason why
09:31the regulator would not come forward and discuss these finer points with it. But again, I repeat,
09:36if you have to be futuristic and in a new world, which is digitally connected, it is in the selfish
09:42interest of the investor that today or tomorrow, they move to an other based KYC process.
09:49Just a last question. And this is something that is going to come up in a few days, Swaroop,
09:53and where I foresee a bit of an issue. And maybe you can weigh in on this is that from the 30th
10:01of April, you need to have the PAN as well as the name on the mutual fund statement as the same.
10:10Is there a possibility that this can create an issue? It's not just the name, but also
10:16the date of birth. So if there's any change, or if there's any way in which a data is being filled
10:22at the mutual fund level, this can create a problem. Do you foresee any issues here?
10:29Alex, I pointed back to you, if my name is something and my mutual fund folio is
10:34pointing otherwise, or if my name is something and my PAN is pointing somewhere otherwise,
10:38or my other is not, it is in my selfish interest to get it corrected. Right? And that's an
10:45the investor has to take. Yeah, but just as a follow up to that, for example, take my name,
10:49and I don't use the full name. I'm known as Alex Matthew, but my full name is Kochu Parekhel
10:54Matthew Alexander. Okay. And in a lot of cases, I'm also called KM Alexander. And there are a lot
11:00of people down south, who have this, they just use the initials. So in certain situations,
11:06one would say that, okay, in your when you're filling the form, you would say, you know,
11:12Alexander Kochu Parekhel, but on your on your PAN, it's possible that you're saved as
11:16Alexander K. There are instances where this can crop up. So you're saying that that needs to be
11:21resolved by the investor themselves? Alex, the money comes in and goes back,
11:26right? Yeah, your PAN card, your name and your most important, your bank account name have to
11:31be the same. Otherwise, you are two different individuals in the identity is a reality.
11:38The sooner or later that you have to take cognizance off and correct that at a fundamental
11:43level, if they are different, then the money back to you can be questioned by the your bank itself.
11:48Are you Alex M? Or are you Alex K is something which has to be correct as per your own name.
11:55That, honestly, is something which every investor has to take upon itself. Yes, there are
12:03data entry errors, which we have to take ownership of. There is no doubt or debate on that.
12:09But I think technology is sorting it out today. If you see the KRA,
12:13you know, just the basic change of address. And I did a fair amount of them online recently.
12:18I didn't have to fill in anything. The back end took care of it on its own. But if my name is not
12:24the same on my PAN or Aadhaar or my bank account, I have to correct it as on yesterday. Otherwise,
12:31I'm not going to get my money back is a reality. Your bank will reject it.
12:36Absolutely. That's a fair point. And we started out with three camps, Swaroop, annoyed,
12:42resigned and blissfully unaware. Hopefully, after this program, there are fewer that fall in the
12:47third camp. And most people gravitate towards the second camp, as you pointed out. Thank you so much
12:52for taking the time. Thank you for having me, Alex. We have to clean up our data. It's a huge task.
12:59But it is in the interest of the investor. And after going through all the debates,
13:04this is my conclusion. I'm just being honest on this one.
13:07Yeah, no, that's fair. That's a fair point. Thank you so much once again for taking the time.
13:11We're talking about what might just be a painful process for you, the reKYC,
13:17if you're investing in mutual funds. And we've talked about what the issue is.
13:21Joining me now to talk about this and a couple more topics, I've got Praveen Bajpai,
13:26who's the founder of FinFix. Praveen, you deal with a lot of investors.
13:31Would you say that it's fair that a bulk of them are facing issues like this?
13:37Good afternoon, Alex. Yeah, investors are facing issues and we at the backend are helping them.
13:43And a lot of that is passed on to, I think, the intermediaries like us who are helping and who
13:49deal with the investors. But yes, in the month of March, actually, Alex, we did get mails regarding
13:57the KYC list, where the officially valid documents were not used. I mean, earlier,
14:03of course, they were the officially valid documents, but now which are not in that list.
14:07And we started working on those. But as we've moved into April, there have been some surprises
14:14where everything seemed OK, but probably the emails or mobiles were not validated. And
14:22since the 1st of April, they started, all the mechanisms were not in place. So with each day,
14:28for example, I've just recently saw that Amfi has now come out with a graphic, how it is distributed,
14:33the current status of investors. The links came up later. So I would say probably it's been
14:41a bit of a chaotic time, the month so far. And I think it will take another, you know,
14:47month or so to actually get everything streamlined and resolved. And especially for investors where
14:52NRIs are involved, CNS citizens are involved and where there is a difference in the name currently,
14:58even in the Aadhaar and PAN. So, yeah, we are all working towards it. There are mechanisms
15:05which are helping us, more links coming up for validations. But in a lot of cases where they say
15:10that modifications can be submitted, like an additional document, the CAMs and CARBI offices,
15:15you know, they are not very on ground. They are saying that it's better that we resubmit KYCs.
15:21So it is a lot of work which is going on at the back. As things stand right now, Praveen,
15:26and I will ask you separately about NRIs, but as things stand in your experience,
15:33what is the best way to go about this? How do you go about this? So first of all,
15:37of course, we have already established, you go on to the website to check the status of your KYC.
15:47And once you get the idea of the status, you move forward. But assume that you are,
15:54you know, you have a status of on hold or you have a registered status.
15:59In your opinion, what's the best way to proceed?
16:01So, Alex, for example, if the obviously the documents, so, you know, three groups here,
16:05basically, that number one, that if you had submitted your bank statement or your utility
16:11bill long time back, and your email and your mobile phone was probably different,
16:16or you had given your BSNL number back then, let's say in 2010 or 2008, you know, even with
16:21a valid document, it'll go under hold because, you know, you've not been able to validate that.
16:26So, I think, of course, you check your status. That is important. If a number is coming that,
16:32you know, zero nine or some other number is written under the address proof, which is given,
16:37that means that you kind of have to do the whole KYC again. If it is written as Aadhaar or password,
16:44sorry, passport, then of course, you know, a passport is, for example, still a valid document.
16:49Then there is a validation link in the CDLKRA website, and you go on that, you put your PAN,
16:58so it'll show you whether your Aadhaar and PAN are linked, whether your email and your mobile
17:04is validated or not. So, you proceed with that. But for example, if your emails and your mobiles
17:09have changed, then you again have to resubmit the new mobile or your email. So, you know,
17:15in cases where something is getting stuck, I think the better way is to just resubmit your KYC
17:21so that you're good for the times ahead. And it's strange, Alex, that, you know, I'll point out
17:27because, you know, I was listening to Suroop, Aadhaar, in our own, you know, my experience
17:34was not actually taken as the only proof of address till a few months back. And we were told
17:39that, no, in addition to Aadhaar, you submit something else as well. And now the only document
17:45that they want is Aadhaar. So, it's, you know, I feel that there has not been too much of
17:49uniformity the way the whole thing has been managed. It's unfortunate. And unfortunately,
17:54look, it doesn't change the fact that mutual funds are, in fact, one of the best investments
17:58or instruments that you can use. And so, therefore, the only way to use them is to get this
18:03done. And we've talked about some ways in which you can. Now, one of the statuses that you have
18:11is the registered status in which you are allowed to transact in the folios that you currently have,
18:17but you cannot make new investments in the or you cannot get new folios, that is, you cannot
18:24buy what you don't have or go to mutual funds schemes that you don't currently have. But it
18:30got me thinking, right, Praveen, of course, you have to fix that situation. But there are people
18:35with a whole host of folios and we've spoken about this often. Weirdly enough, they are going
18:41to be forced to stick with their existing folios. Is that such a bad thing? A little thing, you know,
18:49on the brighter side here, definitely, Alex, because, you know, we keep saying that even in
18:54the same fund house, people go and tend to create a new folio. So, for example, if they're investing
18:59in ICICI, probably they have five different folios from five different schemes and that is actually
19:05not right. So, it's good, number one, that, you know, probably you look at your portfolio and say
19:09that, okay, maybe I can take an incremental investment in one of the existing schemes that
19:15they have. Of course, that shouldn't be out of compulsion, but it definitely gives them a chance
19:20to review if that can be done. And the second, Alex, you know, the benefit of holding a lesser
19:26number of folios, I think that comes up and there is a lot of merit to it because even in the same
19:31fund house, you can have as many schemes under the same folio and that really adds to a lot of
19:36convenience. None of your schemes will ever get misplaced. So, you know, with multiple brokers,
19:42with multiple distributors or agencies, you can have the same folio and if all the details in one
19:47folio are correct, you know, it's then, you know, you're sorted. So, you don't have different folios
19:53where you have to keep checking whether your emails, nominees are there or different in all
19:57of them. So, I think definitely a lot of merit to having a single folio within the same fund house.
20:04I think that is something that investors should ideally do and if they do have multiple folios,
20:10they should actually work towards consolidating them if the details in all the folios are same.
20:15Okay, fair point. All right, which is not to say that you should not go out and fix the
20:20issues with your KYC. You must do that ASAP. Absolutely, that needs to be done and there's
20:25merit to that as well, Alex. No, you know, little trouble here. I would agree that redemption
20:30shouldn't be affected at this stage. They have to have some mechanism to allow redemptions even if
20:36your KYC is on hold. I think that is a very strong case, you know, that should be done.
20:41But otherwise, I feel that they have to now because, you know, people are just
20:46awakened that, okay, this is happening, our SIPs are going on hold, other issues.
20:50I think the process further, you know, some sort of facilitation should come and the process should
20:55become more and more digitized and I say that there has to be a central system where all our
21:01details are there and that can be fetched by all different agencies, be it your driving license,
21:05be it your passport and everything. I think India is doing so well on that front and this
21:11is really needed. But the point on redemptions is absolutely well taken. Why should any
21:17organization hold my money against my will simply because a document is out of place, right? But
21:24having said that, that point is made. There are a few questions that have come our way,
21:29Praveen, and I would like to take a few of those queries with you. The first one that has come in
21:33is from Hassan. He's 65 years old and he's looking for guidance. He says that he's invested 10 lakh
21:39rupees in SBI balanced hybrid fund with an SWP, a systematic withdrawal plan of 6000 rupees per
21:47month. His account statement shows a cost of investment of 8,78,224 and the current value
21:54is 10,68,000. So, he's made some money on this. Is this okay or does he need to change his SWP
22:02amount? I would think that this has to do with how much money he needs, right, Praveen?
22:08Yeah, Alex. I think he said SBI balanced funds. I'm considering as the SBI balanced advantage fund
22:13because there is also an SBI hybrid equity fund. So, it's a two-year-old fund, Alex. And of course,
22:20when we do an SWP, it is ideally based on the amount that the investor needs. But in any case
22:26scenario, the amount, the percentage of withdrawal should be lesser than the growth that we are
22:31looking at for the scheme. And let's not look at the last one year or two-year returns. It's
22:36important that we look at rolling returns or returns over a longer period of time.
22:40So, balanced advantage as a category has given somewhere between 10% to 12% returns over the
22:4610-15-year period. And the amount that he's withdrawing currently, which would be somewhere
22:53between 70,000 a year is lesser than the growth. So, his withdrawal is around 7%. So, he can
23:02continue with this pace of withdrawal. But Alex, if he is trying to do an inflation-adjusted
23:07withdrawal, then his corpus would get depleted in the next 15 to 18 years.
23:13Fair point. The next question is from Prabhanu Sikaria and he's 29 years old. He's asking about
23:20an investment right now of 8 lakh to 10 lakh rupees with a moderate to high-risk appetite.
23:27He's saying that the question assumes significance as the appraisal cycle for
23:30corporate employees just got completed with the financial year end. His current mutual fund
23:35holdings are 92% directed towards equity and 8% in debt and the amount invested is 20 lakh.
23:42How should he manage the incremental investment problem?
23:46It's great to see, Alex, that at a young age of 29, he's investing a lot towards equities,
23:51which is great. But two things here. Number one, I hope that he has a contingency fund which holds
23:56money in a liquid fund or an FD, which is equivalent to at least 6 months of his monthly
24:01expenses. That's a must. If he doesn't have that, he should build that first. Second,
24:06that the asset allocation really needs to be checked because 90% of his corpus is in equities
24:12and even with the thumb rule of 100 minus your age, it is in the high-risk category. So, I think
24:20something that he needs to add is a large cap fund to bring down the volatility in his equity
24:28exposure. And I think that would be good for now. And if he's looking at something more moderate,
24:33then a hybrid fund would be a good ideation. Okay, fair point. Thank you so much, Praveen.
24:38We're completely out of time. But always a pleasure having you on the programme. Thank
24:42you so much for taking the time. Thank you so much.
24:44Viewers, that brings us to the end of this particular edition of The Mutual Fund Show.
24:48Let us know what you think and write to us if you've got any questions. In the meanwhile,
24:51stay tuned. Lots more coming up on NDTV Profit.
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