In a significant relief for investors, the Securities and Exchange Board of India (Sebi) has amended its Know Your Customer (KYC) guidelines, allowing individuals with inoperative PANs to invest in mutual funds. This change, announced on May 14, 2024, addresses the challenges faced by investors whose PANs became inoperative due to the failure to link them with Aadhaar.
Previously, from April 1, 2024, the KYC status of investors who had not linked their PAN with Aadhaar was marked as “On-hold.” Under the new guidelines, if the PAN, name, and address have been verified by a KYC Registration Agency (KRA), the KYC status will now be shown as “KYC Registered” instead of “KYC On-hold.” However, to achieve a “KYC Validated” status, investors must still link their PAN with Aadhaar.
The revised rules clarify that linking PAN with Aadhaar is no longer mandatory for obtaining a “KYC Registered” status. Previously, both “KYC Registered” and “KYC Validated” statuses required this linkage. According to the updated Sebi circular, KRAs must verify the PAN, name, and address of all clients within two days of receiving KYC records. These records, once verified against official databases like the Income Tax Department, Aadhaar XML, Digilocker, or M-Aadhaar, and confirming the PAN-Aadhaar linkage as per Rule 114 AAA of the Income Tax Rules, 1962, will be considered “Validated Records.”
This amendment simplifies the KYC process by removing the immediate requirement for PAN-Aadhaar linkage, allowing more investors to participate in mutual fund investments without unnecessary delays.
