Updated KYC Rules for NRI Investors Announced: June 2024

The Securities and Exchange Board of India (SEBI) revised the Know Your Customer (KYC) norms for mutual fund investors on May 14, 2024. These modifications specifically targeted non-resident Indians (NRIs), significantly altering the KYC registration and validation process for NRIs investing in Indian mutual funds.

Previously, SEBI had mandated additional KYC documents for NRIs, complicating their investment process. Now, some relaxations have been introduced to facilitate continued mutual fund investments by NRIs. Let’s examine these relaxations and how NRIs can benefit from them.

Reasons for SEBI’s KYC Rule Modification:

NRI investors faced several challenges with the earlier KYC rules:

1. Limited Aadhar integration: Only 25% of NRIs possess an Aadhar number, with merely 7% successfully linking it to their Indian mobile number. The main obstacle is the OTP verification authentication, which requires an active Indian mobile connection.
2. OTP verification issues: Only 3% of NRIs received OTPs on their Indian mobile numbers due to problems like inactive carrier services or message delivery failures. Additionally, updating KYC status and validating credentials on a centralized KYC registration agency website proved challenging.
3. International number restrictions: Many NRIs encountered difficulties due to international mobile numbers and were unable to update their KYC status with certain asset management companies.

Steps for NRI Investors:

Before investing, investors should verify their KYC status on the five KRA websites: CAMSKRA, CVLKRA, Karvy KRA, NDML KRA, and NSE KRA.

SEBI recognizes three KYC statuses:

1. KYC Registered: Investors with this status can continue investing until April 30, 2025, without submitting additional documents. However, they must ensure Aadhar-based KYC-validated status for mutual fund investments after April 30, 2025.
2. KYC Validated: Investors with this status can freely invest in any mutual fund house.
3. KYC on Hold: NRI investors with this status must repeat the KYC process.

Addressing “KYC on Hold” Status:

NRI investors with “KYC on Hold” status can inquire on a website using their PAN. They must then undergo the KYC process again.

It’s important to note that there’s no online provision for NRI investors to rectify their KYC, as the Aadhar-based process is limited to within India’s geographical boundaries. They must submit documents physically to validate their KYC.

If the KYC is on hold solely due to unlinked PAN and Aadhar, the status automatically changes to “registered.”

Offline KYC Process: For the offline KYC process, NRIs must ensure their mobile number or email ID is updated and validated in the KYC records.

KRA doesn’t validate overseas mobile numbers for NRI investors, so KYC status isn’t affected by this. However, if an NRI investor’s email ID isn’t validated, KYC can be put on hold until the email address is verified.

Conclusion

SEBI’s recent amendments to KYC norms offer relief to many NRI investors interested in Indian mutual funds. These changes aim to simplify mutual fund investments for NRIs.

NRIs should check their KYC status on the KRA website and ensure their information is up-to-date.

FAQs’

Q1. What changes did SEBI make to the KYC norms for NRI mutual fund investors in 2024?

Ans- SEBI revised the KYC norms on May 14, 2024, to simplify the process for NRIs investing in Indian mutual funds. These changes mainly relax some of the previously required documentation and allow easier KYC registration and validation.

Q2. Why were the previous KYC rules challenging for NRIs?

Ans- The earlier KYC rules were challenging for NRIs due to limited Aadhar integration, difficulties in OTP verification, and restrictions with international mobile numbers, making it hard for them to complete the KYC process.

Q3. How does SEBI categorize KYC statuses for mutual fund investors?

Ans- SEBI categorizes KYC statuses into three types: “KYC Registered,” “KYC Validated,” and “KYC on Hold.” Each status has different requirements for NRI investors regarding their ability to invest in mutual funds.

Q4. What does “KYC Registered” mean for NRI investors?

Ans- KYC Registered” means the investor can continue investing in mutual funds until April 30, 2025, without submitting additional documents. However, they must complete an Aadhar-based KYC validation to invest after this date.

Q5. What is required for NRIs with “KYC Validated” status?

Ans- NRIs with “KYC Validated” status have fully completed their KYC process and can invest in any mutual fund without additional documentation or restrictions.

Q6. What should NRIs do if their KYC status is “KYC on Hold”?

Ans- NRIs with “KYC on Hold” status must redo the KYC process, which may involve submitting physical documents in India since there is no online option available for those outside India.

Q7. Can NRIs update their KYC status online from outside India?

Ans- No, NRIs cannot update their KYC status online from outside India. The Aadhar-based process is geographically restricted to India, so they must submit their documents in person or via a representative.

Q8. What should NRIs do if their PAN and Aadhar are not linked, affecting their KYC status?

Ans- If the KYC is on hold because the PAN and Aadhar are not linked, the status will automatically change to “registered” once the PAN and Aadhar are linked.

Q9. Does SEBI’s KYC rule change impact NRIs with unvalidated overseas mobile numbers?

Ans- No, SEBI’s changes do not impact NRIs with unvalidated overseas mobile numbers since KRA does not validate foreign mobile numbers. KYC status will not be affected by the mobile number, but an unvalidated email can put the KYC on hold.

Q10. What is the recommended action for NRIs regarding their KYC status after SEBI’s amendments?

Ans- NRIs should regularly check their KYC status on the KRA websites and ensure all information, like email addresses and linked PAN and Aadhar, is up-to-date to avoid any disruptions in their ability to invest in mutual funds.