“Individuals must note two aspects. First is if they have verified their mobile number and email ID and second whether the address proof document given by them is on the list of officially valid documents (OVD) as of date. As per the circular dated March 28, 2024, by CDSL Ventures, if an individual has verified their mobile number and email ID and the document used for address proof is as per OVD then the KYC status will be verified. There is no need for re-KYC,” says Vinay Dalmia, AVP, Choice Equity Broking Private Limited, a stockbroker.
What will happen to older non-Aadhaar-based KYC accounts post-March 31, 2024?
According to Dalmia, if an existing investor has got their mobile number and email ID verified and has given any other OVD apart from Aadhaar then as per the circular dated March 28, 2024, their KYC status will remain verified and not put on hold with the existing intermediary. “However, if these investors have done their KYC using non-OVD documents, then they will have to undergo a new KYC process to a new intermediary if they are opening an account,” says Dalmia.
According to a circular by CDSL Ventures dated March 28, 2024, “For such older KYC cases (i.e. Non Aadhaar-based KYC records lodged up to August 2023), where the KYC record meets the PAN – Aadhaar seeding validation (where applicable and already implemented w.e.f. July 01, 2023) and Email / Mobile are validated by KRA and the KYC record is in verified (KYC Registered) status with KRA, such investors will be allowed to continue transacting in securities market with their existing intermediary. However, these investors would need to undergo fresh KYC as per the extant framework for getting onboard with any new intermediary. Accordingly, it may be noted that such older KYC cases where email ID/mobile number validation is not successful, such KYC records would need to be put ‘ON HOLD’ in the KRA system with effect from April 01, 2024.”
Experts say that verification of mobile number and email ID is of high importance as without it their KYC would be put on hold. “If the individual has not verified their email ID or mobile number but has given a valid OVD as address proof then also their KYC status will be put on hold,” says Dalmia. Investors must also note that if they have given Aadhaar as an OVD then it must be linked with PAN. “A scenario can be when an investor has verified their mobile number and email ID but has given an Aadhaar card which is not linked with PAN, in this case also the KYC status will be put on hold,” says Dalmia.Lastly, investors must check which documents are in the list of OVDs. “If an investor has not given Aadhaar as address proof then the other document given must be valid and as per the list of acceptable OVDs,” says Dalmia. In order to validate your mobile number and email ID, go here.
According to Raman Jokhakar, author of Ease of Doing KYC and past president of Bombay Chartered Accountant Society (BCAS), “We need ONE NATION ONE KYC for citizens. Each agency asking for KYC again and again is not in line with the ease of living and ease of doing business policy. Regulators should talk to each other and share data, these standalone agency based measures will lead to duplication, harassment and unnecessary blocking of those who are KYC compliant under another regulator such as bank account holders.”
Jokhakar further shares his opinion about what can be done to solve this issue. He says, “For those whose CERSAI data is updated should be spared from this. Special care is required for senior citizens and super seniors before random mass blocking of accounts that was done in the second half of 2023 by the National Securities Depository Limited (NSDL). KRA and SEBI should bring out data on actual numbers of KYC compliance and non compliant accounts, nature of non compliance category wise and what is their risk level.”
Which investors can submit their KYC online?
Not all investors need to submit the KYC records offline. Some specified investors can do it online. “New investors (resident Indians) can do the KYC process online. However, all existing investors who are facing the issue of KYC documents mismatch i.e. their KYC documents are not in sync with the officially valid documents (OVD) will have to physically submit the KYC form (re-do KYC physically),” says Rushabh Desai, founder, Rupee with Rushabh Investment Services.
What will happen if an investor’s KYC status is put on hold?
Experts say that if an investor’s KYC is put on hold, then the stock broking, mutual fund account, derivative, etc. will be put on hold i.e. no transaction can be done.
“If an investor has any active position in say derivative segment, then that position cannot be squared off or closed because of their KYC being on hold. No purchase or sale transaction can be done until the KYC is in verified status. In this case, the position will be squared off on expiry day irrespective of the profit or loss,” says Dalmia.
“SEBI had extended the deadline from December 31, 2023, to March 31, 2024, for updating existing KYC records and indicated that failure to update KYC records by March 31, 2024, would result in such records being treated as invalid, and investors will not be allowed to transact in the securities market,” said CDSL Ventures in the circular dated March 28, 2024.
