SEBI mandates KYC for E-wallets used to invest in Mutual Funds


SEBI has advised fund companies to ensure that mutual fund transactions are completed using KYC-compliant e-wallets. This will become effective on May 1, 2023. “It should be ensured that all e-wallets are fully compliant with KYC norms as prescribed by Reserve Bank of India,”

According to a circular issued by SEBI. SEBI approved fund houses to accept up to Rs.50,000 every fiscal year using e-wallet in 2017. After making KYC required for retaining e-wallets in mutual funds on May 1, 2023, industry analysts believe that the capital markets regulator’s decision will increase security and reduce the danger of fraud in mutual fund transactions.

Jitendra Dhaka, Founder, BankSathi, “For Metro, Tier 1 and 2 cities customers, Know-your-customer (KYC) requirements will ensure that only authorised users have access to e-wallets, thereby boosting security and decreasing the risk of fraud. By integrating KYC to e-wallets, clients will have improved investment transparency, as they will be able to more easily trace their mutual fund holdings and transactions. After the completion of the KYC procedure, consumers will be able to invest in mutual funds using e-wallets without the burden of continuously providing physical documents.

Challenges for Tier 3, 4, 5 cities Customers is that it is possible that a large number of people living in Tier 3 and Tier 4 and 5 cities are unfamiliar with the KYC process and struggle to understand the criteria and processes involved in it. And they may not have a sufficient level of literacy in digital media, which makes it difficult to perform KYC through online platforms. Customers that live in more remote areas and do not have access to the internet or cellphones may have a more difficult time completing the Know Your Customer procedure online. As a result, the SEBI and the companies that supply e-wallets have a responsibility to inform users about the advantages of KYC and to simplify the process of completing KYC for customers in Tier 2 and Tier 3 locations. E-wallet service providers should also study other ways for users to complete KYC, such as the installation of kiosks or the formation of partnerships with local agents who can assist customers through the process.”

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