As the deadline looms for the end of the relaxed KYC norms for Non-Resident Indians (NRIs) investing in mutual funds, the Association of Mutual Funds in India (AMFI) is exploring alternative solutions to maintain seamless investment opportunities. With the current exemption set to expire on April 30, 2025, AMFI, under the guidance of the Securities and Exchange Board of India (Sebi), is actively seeking ways to ease the KYC process for NRIs without relying on Aadhaar.
Insiders reveal that AMFI is considering the validation of other documents, such as passports, as potential substitutes for Aadhaar in the KYC verification process. Though Sebi has provided a one-year window to address this challenge, the exact methods and timelines for implementing these alternatives are still under discussion.
The issue gained traction following a Sebi directive in May 2024, which allowed NRIs to invest in new mutual fund schemes even if their registration was not fully verified, provided certain conditions were met. This temporary relief, however, underscores the urgency of finding a long-term solution as the deadline approaches.
Sebi Chairperson Madhabi Puri Buch recently acknowledged the challenges faced by NRIs and expressed the regulator’s openness to feedback from AMFI in resolving these issues. “We are extremely open to feedback on finding solutions for these challenges,” Buch stated.
The KYC process for mutual fund investors has been a longstanding hurdle, with many accounts on hold due to incomplete documentation. Earlier this year, approximately 1.3 crore mutual fund accounts were flagged as ‘on hold’ for this reason. Sebi’s directive, which invalidated documents like electricity bills and bank statements for KYC purposes, further highlighted the need for streamlined verification methods.
As the industry braces for the upcoming deadline, all eyes are on AMFI and Sebi to see how they will navigate this critical issue for NRI investors.
Source: Money Control