Investors putting their money in mutual funds, will have to mention their permanent account numbers (PAN) or submit a proof of applying for the same along with the MF application from tomorrow, as fund houses start complying with the know your customer (KYC) norms of the Securities and Exchange Board of India (Sebi).
The regulator had asked the fund houses to follow the KYC norms from July 2. The norms seek mandatory disclosure of the PAN number by the investor.
However, last week, the Sebi allowed fund houses to accept investments from investors, who have applied for PAN, provided they attach evidence of their PAN application with their investment form.
This exemption is given till December 31, 2007. The Sebi has also exempted micro-pension schemes from this compliance.
Earlier, investors investing above Rs 50,000 had to disclose their PAN details. But, following the new KYC norms, every MF investment will require either PAN or its application proof.
The decision will mainly affect fund houses, which are targeting low-income investors, especially based in rural and semi urban areas, as a significant number of these investors do not have PAN.
Funds such as UTI, Lotus and ICICI Prudential had recently started micro-SIPs, through which investors could invest a minimum of Rs 50-100 a month in a mutual fund scheme. The fund houses have tied up with co-operative institutions, local trade bodies for attracting their members to the MF fold.
Even though the contribution of these investors to the overall MF corpus is very minuscule, the fund industry is finding implementation of this decision a hard task. The distributors are also worried over the decision, as the responsibility of getting the PAN compliance from investors rest on them.