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Aadhaar linkage order burdens AMCs

Aadhaar linkage order burdens AMCs
Asset management companies (AMCs) are feeling the burden of the Association of Mutual Funds in India’s (Amfi’s) decision to make the Aadhaar citizen identification mandatory for investment. 
From January 1, Aadhaar details of customers, including existing ones, are to be mandatory for investment in MFs. Insiders told Business Standard this was an order to Amfi from the Union ministry of finance. "We just passed this on as an official communication to members," said an Amfi board member. He added no AMC was in favour, as this puts the onus on them to link Aadhaar. 
Most top officials preferred anonymity, as they did not want to be quoted against the new rules of the game.
Swarup Mohanty, chief executive officer (CEO) of Mirae Asset, says, "The task of getting all investors to list their Aadhaar number with us is big. Failing which, the folios would enter into a freeze zone and no transactions would be allowed. We have started the process from this month and are already seeing a fair number of upgradation. So, by December, we are hopeful that the bulk of our folios would get Aadhaar details listed."
What has irked officials the most is the responsibility imposed on fund houses to adhere to the new norms. More so as in the past few years, there have been numerous changes in the Know Your Customer (KYC) requirements for investors.
"We have no problem if Aadhaar is linked with investors' accounts. But, asking us to ensure this, for all the existing clientele as well, is not easy. Then, what's the use of a central KYC when individually every financial sector has to do it time and again," questioned a CEO of a large fund house.
He says there were other ways to implement this. As almost all money which flows into MFs through banking channels and customers are already linking their Aadhaar details with banks, it would have been better if the data could be sourced from the banks or the central KYC agency, he suggested.
Several fund houses are not limited to urban centres — they have been penetrating elsewhere, too. Investors in urban centres are more likely to update the required details in time, unlike those in rural and semi-rural territories.
"Investors could face inconvenience as accounts without Aadhaar linkage will get frozen. 
This way, we are forced to deny investors from being able to withdraw their own money when in need until Aadhaar is linked," says a top MF official.
Distributors, individual financial advisors, registrar agents like Karvy and CAMS, and fund houses' own offices would have to be massively engaged in the process to get the job done on time. 
Sector executives put the individual number of investors in mutual funds at about 10 million. The folio counts is over 60 million, while systematic investment plan accounts are 16.6 mn.
The Business standard, New Delhi, 31th October 2017

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