ON KYC RESHOOT
This article I read is true o all KYC reviews now being carried out by so
many institutions. What would go wrong in a decade when all accounts in
decade did not change in any institutions; of the incoming is welcome and
KYC of the institution is not a matter to be proved by all those before the
customers, why would rekyc is insisted upon without going to client
premises without TA and DA for the work, in the interests of the nation and
the institutions? t
“If KYC is good, then more KYC must be better, right? Having a KYC for
mutual fund investors prevents black money and benami investors from
investing in mutual funds. So if we double the frequency at which the same
investors have to get KYC'ed again and again, then that will surely do the
job better, right? Well, at least that's the principle on which the KYC
activity seems to be organised.
>From March 23, 2014, slightly more than a decade ago till the following
decade all of the status report of KYC, can be summarised in these points:
1. The excessive and repetitive nature of KYC exercises is a burden on
small retail investors and prevents many from investing in mutual funds. 2.
The repeated demands for reKYC are not consistent and appear to have no
logic. 3. Even if one goes through the process faithfully, a demand for
reKYC can reappear at any time and create a sudden roadblock for mutual
fund transactions. 4. The guidelines on how reKYC is to be done do not
correspond to actual practice.
Actually, the problem is worse now than a decade ago. In those days, a
much higher proportion of investors dealt with a distributor who provided
in-person service. Moreover, this was universally true for new investors.
This person knew how the system worked and would make sure that the KYC
went through because they needed to get the transaction done to earn their
commission. Nowadays, we are halfway through the transition to an
all-digital system. In-person service is not available for direct digital
investors or most other investors. On top of that, it's clear from social
media that a huge number-many lakhs-of investors have quietly been put into
an 'on hold' KYC status and their mutual fund transactions are blocked. The
process is not working as it should. For example, the official FAQ on KYC
lists seven types of identity and address documents that can be used for
KYC.
However, countless people complain that of the seven, only Aadhaar is
actually acceptable. Why should this be the case? Does anyone know? People
nowadays quote something called the 'Shirky principle'. It states that
"institutions will try to preserve the problem to which they are the
solution". When I look at the decade-long KYC mess, I feel this might be
the case here, at least partially. When you go through a KYC process,
someone makes money. If you have to go through it again needlessly,
someone's revenue is doubled. reKYC is good business for the KYC industry.
Do you remember how toll roads used to be before Fastag came in? You would
be zipping along a wonderful new highway and then suddenly have to get into
a one-kilometre queue to pay the toll with actual cash! That's what mutual
fund investing has come to. There's this fabulous new digital financial and
banking system and a national digital ID system we have in this country
that's the envy of the world. However, mutual fund investors have to run
around to physical offices to prove their identity as if this is the 20th
century. This problem has become a festering wound for the Indian mutual
fund investor. In reality, all we need is a modification in the rules/laws
that as long as the money comes in and goes out through a KYC'ed bank
account, that's all that's needed. This whole mutual fund KYC activity is
just a gigantic make-work project that does not need to exist. “ KR IRS
26424
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