Fund houses will be permitted to create new folios only after completing detailed KYC verification of investors
| Photo Credit:
ABEER KHAN
The Securities and Exchange Board of India (SEBI) has proposed an overhaul of the Know Your Client (KYC) verification process for new mutual fund investors to reduce instances of delays in accessing their funds due to compliance mismatches.
Under the draft norms, investors will be allowed to make their first investments in newly formed MF folios only once the KRA provides explicit approval, ensuring that the KYC status is verified and active.
Asset management companies (AMCs) will be required to update internal systems and align workflows to ensure investors receive notifications at every stage of the KYC process via email and mobile alerts.
Fund houses will be permitted to create new folios only after completing detailed KYC verification of investors. The verified documents must then be forwarded to KYC Registration Agencies (KRAs) for final validation.
The move aims to minimize operational inefficiencies and confusion that often arise when investor details remain unverified or inconsistently recorded across intermediaries. Once folios are flagged as KYC non-compliant, it results in blocked transactions, delayed redemption proceeds, and unclaimed dividends.
SEBI has invited public comments on the draft framework until November 14.
Published on October 23, 2025