KYC, done right

No money moves into a mutual fund until the investor is KYC compliant, and the exam tests the fine print here closely. The first rule is the broadest: KYC is mandatory for everyone, every holder, joint holders, the guardian of a minor, and the holder of a Power of Attorney, and there is no minimum amount below which it can be skipped.

The heart of the system is that KYC is done once and shared. An investor completes it with a KYC Registration Agency (KRA), a mandatory In-Person Verification (IPV) is carried out, and the record is then valid across the entire securities market; every application simply carries the KRA acknowledgement. Alongside sits CKYC, run by CERSAI as the Central KYC Records Registry, where intermediaries upload KYC for individual accounts opened on or after 1 August 2016, generating a unique KYC Identifier. Modern e-KYC using Aadhaar (with the investor’s consent, by OTP or biometric) is an accepted, valid route.

PAN is the default identity proof and is mandatory, with a few important exceptions. Small investors can use the PAN-exempt route, quoting a PEKRN instead, but only up to ₹50,000 per investor, per year, per mutual fund, and crucially that ceiling is composite: SIP instalments and lump-sum investments are counted together. Other PAN-exempt categories include investors resident in Sikkim, certain central and state government and court-appointed officials, and UN or multilateral agencies exempt from Indian tax, each providing an alternate photo ID. Finally, institutions carry extra KYC: their constitution documents, a board resolution, the list of authorised signatories, and the Ultimate Beneficial Owner (UBO) details. Master this lesson and you have removed the single most common reason an application is rejected.