In the mutual fund industry, KYC (Know Your Customer) is a mandatory compliance requirement governed by SEBI under the Prevention of Money Laundering Act (PMLA). However, not all KYC statuses are equal. From April 2024 onwards, regulators have defined three distinct KYC statuses — Validated, Registered, and On Hold — and understanding the difference between the first two is critical for investors and distributors alike.
KYC Registered means that an investor's KYC record exists in the KRA (KYC Registration Agency) system, but the documents submitted could not be directly verified by the issuing authority, or they do not include PAN or Aadhaar. While existing investments remain unaffected, new investments at a different fund house require resubmission of KYC documents. In simple terms, the investor is in the system — but not fully verified.
KYC Validated, on the other hand, is a higher-trust status. If your KYC status is validated, it means your PAN and Aadhaar have been confirmed by the issuing authority, and you can invest in any mutual fund without repeating the KYC process. This is the gold standard for seamless investing across all SEBI-regulated intermediaries.
The key distinction lies in portability. If Re-KYC is done with any officially valid document other than Aadhaar, the investor will need to redo it every time they invest with a new mutual fund. Hence, it is recommended to complete KYC using Aadhaar so that one can transact freely across mutual funds of their choice.
As of March 31, 2024, out of 108.3 million KYC records, 73% were validated, 15% were under KYC Registered status, and the remaining 12% were on hold.
For distributors, guiding clients to upgrade from Registered to Validated status — ideally through Aadhaar-based e-KYC — is a critical service touchpoint that ensures uninterrupted investment experience and full market access.
Best regards,
Written By Samyak Naik
