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User Guide/FAQs
Central Know Your Customer (CKYC)
1)What is CKYC?
CKYC refers to central KYC (Know Your Customer), a new initiative by
2)What is CERSAI?
Central Registry of Securitization Asset Reconstruction and Security Interest (CERSAI) is a central online security interest registry of India authorized by Government of India to act as and to perform the functions of the Central KYC Records Registry under the PMLA (Prevention of Money-Laundering) rules 2005, including receiving storing, safeguarding and retrieving the KYC records in the digital form for a client.
3)How can I complete my KYC formalities?
You may submit the CKYC form at any of our branches or you may choose to complete your KYC formalities online using the facility provided on our website.
4)What is the difference between KYC and eKYC?
KYC - is the process in the Mutual Fund industry whereby the identity of an investor is verified based on written details submitted on a form, supplemented by an in-person verification process done by the ISC personnel. Once the verification is done successfully, the relevant investor data is entered into the KRA Registration Agency (KRA) system and subsequently uploaded to their database.
eKYC is KYC done with the help of an investor's Aadhaar number. While doing the eKYC, the authentication of the investor's identity can be done:
(a) Via OTP (Limits investments to Rs 50,000 per year per mutual funds and mandates investments via the online electronic mode)
(b) Via Biometrics (No limits on the investment amount here unless those specifically imposed by the scheme / Fund House). This data is uploaded into the records of the KRA.
5)What is the process for completing my eKYC formalities online?
The process flow is as under:
a. Enter your PAN, Aadhaar, Email ID and Mobile Number for validation
b. Post validation, your identity and address details will be fetched from the UIDAI database.
c. Enter some additional information as required
d. Submit your information and the process is done.
6)Is the information that is currently sought on the current KYC form and the new CKYC form, the same?
No. CKYC requires additional information (for e.g. investor's maiden name, mother's name etc) to be collected and submitted to CERSAI for completion of the CKYC formalities of an investor.
7)What is 'KYC Identification Number'?
KYC Identification Number (KIN) is a 14-digit number allotted by CERSAI to an investor who has completed his / her
8)From when is the CKYC applicable and what procedure do I need to follow?
CKYC compliance is applicable for investments received from February 1,
- New investors (investors who are not KYC compliant) will have to mandatorily submit the CKYC form along with the investment application. If the investor has filled the old KYC form in lieu of CKYC form, he will have to submit additionally the Supplementary CKYC form along with the old KYC form.
- Existing investors (investors who are KYC compliant) can continue making investments without any change in the current process.
9)Is CKYC compliance mandated for all categories of investors?
No. Currently, CKYC is applicable only to Individuals (both Resident Individuals and Non-Resident Individuals (NRIs)).
10)What about PAN? Is it mandatory?
a)Investors who have a valid Permanent Account Number (PAN) need to provide the same for CKYC compliance.
b) Investors, who do not have a PAN, need to submit alternate documents (refer CKYC form for details). However, such category of investors can invest (including SIPs)
c) Investors exempt from submission of a PAN:
i) Transactions undertaken on behalf of Central/State Government, by officials appointed by Courts, e.g., Official liquidator, Court receiver, etc.
ii) Investors residing in the state of Sikkim
WHAT ADVANTAGES DO MUTUAL FUNDS HOLD FOR THE ECONOMY?
- Channeling the savings of the public
- Helps strengthen and develop a strong capital market
- Thereby contributes to
capital formation and the growth of the economy
WHAT ADVANTAGES DO MUTUAL FUNDS HOLD FOR INVESTING PUBLIC?
- Professional Management
- Easy Liquidity
- Reduction / Diversification of Risk
- Reduction in Transaction Costs
- Return Potential
- Convenience and Flexibility
- Portfolio Diversification
- Well Regulated
- Investor Protection
- Switchover Facility
- Low Operating Costs
- Tax Benefit
WHAT IS A REPURCHASE/REDEMPTION ?
- Repurchase is a facility to redeem the unit certificates or statements of account at Net Asset Value for hard cash before the tenure of the scheme is up.
- Redemption is the closure of the scheme at the expiry of the tenure of the scheme.
WHAT ARE THE VARIOUS TYPES OF SCHEMES AVAILABLE IN A MUTUAL FUND?
CLOSE ENDED SCHEMES | INTERVAL SCHEMES | |
---|---|---|
Accepts funds from investors on a continuous basis. | Schemes are opened for | |
Repurchase facility available. | Principal normally does not change throughout the year. | Prior to and at such interval the scheme operates as |
No listing in the stock exchange | Such schemes are normally listed in the stock exchange. | During the said period, |
Better liquidity due to continuous repurchase. | Liquidity normally at the time of redemption. | |
Sale and Repurchase based on NAV | Long term investment strategies depending on the life of the scheme. | |
Classification by Investment Objectives:
INCOME SCHEMES | Income Schemes maximize the current income through periodical income distribution. Money is invested in |
GROWTH SCHEMES | Growth Schemes achieve the highest capital appreciation through investment in |
BALANCED SCHEMES | Balanced Schemes provide current income as well as capital appreciation. The investment is in Equity and Fixed income securities as per the offer document. |
TAX SAVING SCHEMES | Tax Saving Schemes provide tax incentives; e.g. Equity Linked Saving Schemes under |
SECTOR FUNDS | Sector Funds invest in securities of |
INDEX FUNDS | Index Funds match the performance of the stock market by tracking an Index that represents the overall market. The investment is in a diversified market index. |
MONEY MARKET FUNDS | These Funds invest in securities of short-term nature, which generally means securities of less than one- year maturity. The major advantages are the Liquidity and safety of principal that the investors can normally expect from short-term investments. |
GILT FUNDS | Gilt Funds invest is in government securities. Since the issuer is the Government of India / State, these funds have little to no risk of default as there is no credit risk involved. |
Classification by Geography:
DOMESTIC MUTUAL FUND SCHEMES: | Schemes launched with a view to |
OFF SHORE SCHEMES: | Mutual fund schemes launched with a view to |
Funds are normally collected through the countries enjoying zero status. The aim is normally long-term capital growth by investing in local equities.
WHAT IS THE DIFFERENCE BETWEEN FIXED DEPOSITS AND MUTUAL FUND SCHEMES
Fixed Deposits | Mutual Fund Schemes |
---|---|
Investment for a fixed period | No fixed tenure in |
Assured return on fixed deposits | No assurance for either returns or capital growth |
Interest income is taxable | Income earned by way of distribution from the |
High safety in Banks, otherwise depends upon rating | |
Low returns | Safety depends upon the investment objective |
Objective is to earn income | High returns |
Objective is to earn income and capital growth |
WHAT IS A LOAD?
The charges made by the fund managers to the investors to cover the
WHAT IS THE RISK INVOLVED IN AN INCOME SCHEME ?
- Credit Risk
: Risk of default by the issuer of the underlying securities invested by the Fund. - Liquidity Risk
: When the market is extremely volatile the investment cannot be easy redeemed. - Inflation Risk
: Erosion in value due to inflation
WHAT ARE THE VARIOUS TYPES OF INCOME FUNDS?
- Money Market Funds
: Investment only in Government Securities and Treasury Bills. - Cash / Liquid Funds
: Investment in a combination of money market instruments and short term debt like Commercial Paper of Certificate of Deposits. The above two funds are ideal to park the surplus funds for short periods. - Bond Funds
: Investment in medium to long term Bonds issued by corporations and governments - INCOME FUNDS ARE IDEAL FOR INVESTORS WHO ARE AVERSE TO RISK
WHY SHOULD YOU INVEST IN A GROWTH FUND?
- Chances of appreciation over time
- Better hedge against inflation
- Growth funds have outperformed the other asset class over long term
- Better than Gold and real estate due to better liquidity and low transaction cost
WHAT IS THE REASON FOR VOLATILITY IN GROWTH FUNDS?
Volatility is due to the portfolio mix of stocks. The mix of stock itself depends upon the degree of diversification in the fund and the extent to which the fund manager tries to hedge. Look at equity as a long -term investment. Stocks may go up and down in the short term but in the long term it will always perform. For confirmation look at the BSE Sensex.
HIGH LOW
1992 | 4547 (Apr) | 2709 (Dec) |
1994 | 4643 (Sep) | 3576 (May) |
1996 | 4131 (Jun) | 2713 (Dec) |
1997 | 4605 (Aug) | 3097 (Jan) |
1998 | 4322 (Apr) | 2742 (Nov) |
1999 | 5151 (Oct) | 3042 (Jan) |
2000 | 6151 (Feb) | 3593 (Oct) |
2001 | 4462 (Feb) | 2600 (Sep) |
This is given as on 5th November, 2001.
WHAT ARE THE VARIOUS TYPES OF GROWTH FUNDS?
- Diversified funds: Ideal for the investors seeking appreciation over
medium to long term investments in equities across variousindustries / sectors either large cap or small cap - Index funds: Ideal for the investor who wishes to, and is also satisfied with, returns equal to that of index
- Sector funds:
Sector specific fund ideal for investors who wish to invest in a particular segment or sector
HOW IS THE PERFORMANCE OF A FUND MEASURED?
- From the investors’ point of
view performance can be gauged from the returns over a period of 3 months, 6 months, and 12 months, and so on. - Compare the peer group in the category and benchmark the return.
- Look at the
risk - return relationship. - Analyze the long - term performance to understand the consistency of performance in bull and bear markets.
- The performance of a fund can be measured by quantitative tools like Sharpe and Treynor ratios.
IS IT SAFE TO INVEST IN MUTUAL FUNDS?
Risk can only be minimized by managing the fund professionally. RISK CANNOT BE ELIMINATED. In the long
CAN MUTUAL FUNDS ASSURE RETURNS?
No. There are no assured returns in mutual funds. The returns can be higher over a long period. In case any mutual fund wants to assure returns they can do so, by clearly expressing the safety
WHAT IS A SYSTEMATIC INVESTMENT PLAN?
Systematic Investment Plan is a method for investing money at regular intervals into the fund of the investors' choice over a defined time frame. This helps the investor invest monthly, quarterly and so on. Since the amount is invested regularly and is constant, the investor gets more units in the falling market and fewer units when the price is high. This helps the investor to smoothen out market fluctuations and the investment will be at a low cost over a period of time. This investment strategy is called "Rupee Cost Averaging"
WHAT IS A SYSTEMATIC WITHDRAWAL PLAN?
Just like the above, it is the process of withdrawing funds at a regular interval. It results in benefiting in the rising market to reap the benefit out of
WHY ARE THERE NO ASSURANCES PROVIDED BY MUTUAL FUNDS?
No assurances can be given as per SEBI Guidelines. Of their own