The systematic investment plan (SIP) transaction of Indians, who have actively been investing in India’s mutual funds, gets blocked ever since they start living in another country. In such a situation, when they are considered a non-resident of India and to avail of the existing services, converting his Indian bank account to a non-resident external account becomes mandatory. For this conversion, he needs to verify his documents with the bank again. In short, the bank asks for a KYC (know your customer). In his case, a video KYC would be very helpful as they now live abroad.
As per the Reserve Bank of India (RBI) regulations and the Securities and Exchange Board of India (SEBI), Indian citizens can facilitate and verify their KYC documentation through a video call. Such a facility has been introduced, acknowledging the Covid-19 pandemic situation. Expanding the video KYC’s scope, RBI, in May 2021, permitted bank customers to update their KYC through video KYC. However, this is no use of an NRI as this facility remains limited within the borders of India.
Access Denied Due to Geotagging
RBI and SEBI guidelines that aim to mitigate the increasing number of money laundering cases, ensure a customer’s presence in India, e-KYC, and video-based in-person verification remain available only to customers who live in India.
As a result, various small and large distributors from India could not make any investments on behalf of KYC non-compliant NRIs who could not visit India due to the coronavirus pandemic.
Complicated KYCs due to Bank Mergers
Due to bank mergers, a customer’s bank account number and IFSC code have changed. The transition has not only complicated every bank-related facility for Indian residents but also NRIs. Redemptions from mutual funds cannot be deposited in the bank account of the below banks due to bank mergers.
- Allahabad Bank
- United Bank of India
- Oriental Bank of Commerce
- Syndicate Bank
- Andhra Bank
- Corporation Bank
- Indian Bank
- Punjab National Bank
- Canara Bank
- Union Bank of India
The banks, as mentioned earlier, have been operating having a merge with each other since July 1.
Account-holders, who have SIP registration from these banks, must submit a ‘change of bank mandate’. After that, redemption would hit their bank accounts.
This creates a worse scenario for NRIs. The SIP demands an account holder to re-login with the change of a bank’s IFSC code and MICR code. As mentioned earlier, the process becomes more difficult for NRIs as they need to request a fresh bank mandate after signing the required documents. And this process takes at least 10-15 days to be executed.