SEBI's New Rule: Complete KYC process before investing in mutual funds

SEBI's New Rule: SEBI has made a major change for mutual fund investors, which will prove significant for both investors and asset management companies (AMCs). Now, it will be mandatory to complete the KYC process before opening a new folio and depositing the first investment amount. This aims to protect investors from fraudulent transactions and delays in processing.

Also Read: Do reduced GST rate cuts really translate into savings for customers?

SEBI has taken a major step for mutual fund investors

The first investment amount can now be deposited only after the final verification by the KYC Registration Agency (KRA) is complete. Previously, AMCs used to accept investments immediately based on their internal KYC checks, which later resulted in delays in redemptions, dividends, or notifications for investors due to KYC discrepancies.

Under the new rule, the asset management company will first complete all documentation and internal verification, after which the folio will be sent to the KRA, and only after verification can the investor deposit the first investment amount.

What if KYC is not completed?

If the KYC process is not completed, investors will be temporarily barred from making further investments and will not receive redemptions or dividends on time. It also makes it difficult for asset management companies to contact and make payments to investors. This change will benefit both investors and asset management companies.

Also Read: Banking laws will change from 2026, with 100-fold compensation for locker theft

The likelihood of errors will be reduced, compliance with regulations will be easier, and transactions will be more accurate. However, there may be a slight delay in the initial investment amount as KRA verification may take 2-3 days.

SEBI seeks feedback

SEBI has also sought suggestions from the general public and investors on this new rule. Investors and stakeholders can share their feedback on SEBI's web portal until November 14, 2025. Additionally, AMCs, KRAs, and other intermediaries will have to adapt their systems and working methods to comply with the new rules, ensuring timely and accurate delivery of all investments after the rules come into effect.