Skip to main content

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


Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

New money laundering norms stump jewellery sector

New money laundering norms stump jewellery sector Dealers with turnover of Rs 2 crore and above covered; industry says threshold too low The central government has notified the money laundering rules for the gems and jewellery sector with immediate effect. Now, any entity deals in precious metals, precious stones, or other high-value goods and has a turnover of Rs 2 crore or more in a financial year will be covered under the Prevention of Money Laundering Act, 2002 (PMLA, 2002). The limit of Rs 2 crore would be calculated on the basis of the previous year’s turnover, said the notification. The directorate general of goods and service tax intelligence has been appointed under the Act. Sources said the government’s move to apply the PMLA to the jewellery sector was a fallout of income-tax raids on jewellers soon after demonetisation last November, when it was found that they sold gold and jewellery at a huge premium and accepted old currency notes as payment. The notification, issued on Augus…

Confusion over branded food GST

Confusion over branded food GST The GST Council's statement over the weekend on applying tax on branded food items has left most of the trade confused.

Even though the Council has not changed the rates on food -0 per cent on unbranded stuff and 5 per cent on brands -many small traders who didn't levy GST earlier said they could come under the 5 per cent slab after the clarification.

While they predicted some increase in consumer prices, large players said they can absorb GST in many ways and keep prices steady.

"Trade is confused and hence on behalf of our chamber, we have asked our members to go ahead and charge 5 per cent GST," said Sushil Sureka, general secretary of the Ahilya Chamber of Commerce and Industry in Indore.

The statement clarifying the application of GST came after some businesses were found deregistering their brands and selling under corporate brand name without paying tax, after the Council exempted unbranded food from the new all-encompassing indirec…