Sebi tightens KYC for MFs, skips unified check

New KYC rule to curb unclaimed dividends and blocked redemptions

- Apoorva Ajith

India's markets regulator has proposed tighter know-your-customer (KYC) checks for mutual fund investors, but stopped short of creating a single centralized verification system—something the industry has long sought for seamless onboarding across the country's financial platforms.

In the draft rules, released Thursday, the Securities and Exchange Board of India (Sebi) said fund houses can accept a first-time investment or open a new folio only after an investor's KYC is fully verified and marked “compliant” by the KYC Registration Agency (KRA), a move to prevent rising cases of unclaimed dividends and blocked redemptions and to improve compliance among mutual funds.

But the absence of interoperability between Sebi's PAN-based system and the government's Central KYC (CKYC) means investors still need to complete multiple verifications across banks, insurance, and mutual funds.