Come Feb 2, you can use PAN as common ID for all mutual funds

Beginni-ng February 2, the permanent account number will serve as the common...

Beginni-ng February 2, the permanent account number (PAN) will serve as the common identification number for all mutual fund (MF) investments above Rs 50,000. This single number will work for all MFs — unlike today when each investor has to provide a separate number (folio number) issued by each of the 32 fund houses.

Along with PAN, investors would have to provide all documents required to service the funds’ know-your-customer (KYC) norms. They will receive an acknowledgement number from CDSL Ventures Ltd (CVL) and their PAN card number will act as the number that will be used as the common identification number, said the compliance officer of a mid-sized fund house. This is because the capital markets regulator, the Securities and Exchange Board of India (Sebi), has already issued guidelines according to which separate number cannot be issued.

At present, all mutual fund investors investing online are first required to fulfil the KYC norms with each individual fund house and issued folio numbers by them. This number is then used to invest with that fund house. “Once the investor has established his identity with a fund house through KYC, he can use his folio number to invest further with that house. But now we are trying something like issuing a common number that can be used by all fund houses for investment by an investor,” explained the chief executive of a large fund house. “It should be out anytime now,” he added.

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Proceeding with the KYC formalities repeatedly with every fund house is a tedious process and to maintain 32 folio numbers for investing in the 32 fund houses is rather impractical. Once PAN is made the default number for investing in MFs, it will convenience direct mutual fund investors and allow them to invest on the same day’s NAV with any fund house. Currently, investments get delayed because of the cumbersome process of first getting the KYC done from the mutual fund’s office and then getting permission to invest. The entire process takes seven to 10 days.

Against this, distributors get the KYC process done immediately and the direct investor misses out not only on the immediacy of investment but has to pay 2.25-2.5 per cent to the distributor, irrespective of whether he routes the money through the distributor or not.

Armed with PAN and an acknowledgement number issued by the CVL, direct investors will now have a more trouble-free investment ambience.