Huge rush in complying with Know your Customer (KYC) norms for the mutual funds industry is leading to an increase in its processing time. The KYC process which earlier used to take a day earlier now takes up to 8-10 days.
CDSL Venture (CVL), a subsidiary of CDSL (Central Depository Services), is carrying out the process of KYC and is receiving over 20,000-25,000 KYC applications on a daily basis. Earlier, it used to be 800-1,000 applications. Association of Mutual Funds in India (Amfi) had directed all the fund houses to comply with KYC norms with effect from January 1, 2011.
As per rules, all fresh MF investments have to comply with KYC norms from this year. And with 50 lakh mutual fund investors in the country, MFs are facing the challenge of bringing everyone under the KYC ambit. In urban cities it is taking one-two days to process KYC procedures, while in semi-urban and rural areas they are taking as long as 8 days.
“We are losing out many investors due to delay in completing the KYC norms. Usually, this is the time, retail investors start investing into equity linked saving scheme (ELSS) funds for gaining tax advantages,” said a leading distributor on condition of anonymity. Waqar Naqvi, CEO of Taurus MF said, “Due to compulsory KYC, the application volumes have gone up in the last few days”. He however added that the sudden rush might have led to some technical glitches, which could be ironed out over a period of time.
Amfi has even asked all the distributors to complete the Know your Distributor (KYD) norms by February. “We hope the technical issued are solved fast, so that we can process the KYC norms fast which will be beneficial to us as well as investors,” said a distributor. Despite repeated attempts to contact CVL officials, they remained unavailable for comment.