SEBI Proposes Standard Process For Opening Mutual Fund Accounts & First Investments

The Securities and Exchange Board of India (SEBI) has proposed a new standard process for opening mutual fund accounts and executing the first investment. The move is aimed at ensuring that all new accounts are fully KYC-compliant before any money is invested.

Currently, mutual fund companies carry out their own KYC checks when opening a folio and then send the investor's documents to a central KYC agency (KRA) for verification. If the KRA finds any issues, the folio is temporarily marked non-compliant, causing delays. Investors face difficulties in making their first investment and receiving redemption payouts or dividends if bank details are incorrect. At the same time, fund houses struggle to communicate with investors or credit payouts, leading to increased unclaimed amounts.

Under SEBI's proposed process, AMCs would first collect and verify KYC documents at their level, and then forward them to the KRA for final verification. Investments in a new folio would be allowed only after the KRA confirms the account is fully compliant. Investors would also be kept informed at each stage via email or SMS.

AMCs, KRAs, and intermediaries would also be required to update their systems and workflows to comply with the new guidelines. SEBI has invited public feedback on the proposal, with comments to be submitted by November 14, 2025.