New guidelines by SEBI – Use of e-wallets in MF investing to be KYC compliant

KYC compliance of e-wallets in mutual fund investment

New SEBI Guidelines

E-wallets or mobile wallets have redefined the way of making payments. They are popular, convenient, and used for different types of transactions. Mutual funds also accept e-wallets as a valid mode of payment for investments.

The Securities and Exchange Board of India (SEBI) recently issued a directive regarding using e-wallets for mutual fund investments. The directive states that e-wallets are only allowed for investments if they are KYC-compliant per RBI (Reserve Bank of India) norms.

Earlier, SEBI allowed using e-wallets in mutual fund investing through a circular issued in 2017. Since then, many investors have used digital wallets to invest in mutual funds. As per the 2017 circular, SEBI allowed the usage of e-wallets and cash up to a maximum limit of Rs.50,000.

In the latest circular, issued on 23rd March 2023, SEBI directs investors to get their e-wallets KYC compliant. The regulator has asked investors to ensure their wallets are KYC-compliant per RBI norms. They would not be allowed to invest in mutual funds if they were not.

The new directive would come into effect from 1st May 2023. Till then, investors have time to complete the KYC formalities for a hassle-free investment.

Why the new directive?

Justifying the issue of the new directive, SEBI stated that the move was aimed at two main objectives:

Promoting digital payments in an ever-increasing digitised society
To channel household savings and direct them into the mutual fund industry
Moreover, with the latest circular, SEBI aims to regulate the securities market more effectively and aid in its development.

Related - Learn about SEBI's new directive on AIFs

The mutual fund industry

Mutual funds have become a preferred investment avenue for many. Per reports, the Assets Under Management (AUM) of the mutual fund industry have grown from Rs.8.14 trillion to Rs.39.46 trillion within 10 years between 28th February 2013 and 28th February 2023. (Source:https://www.amfiindia.com/indian-mutual#:~:text=Assets+Under+Management+(AUM)+of,a+span+of+10+years.)

SEBI is the regulator of the mutual fund industry. It regularly issues circulars and directives to regulate the industry and make it more customer-friendly.

The latest circular promotes efficient digital investments in mutual funds through e-wallets.

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