In a circular dated 5 November 2019, the Securities and Exchange Board of India (SEBI) permitted and issued guidelines for mutual fund distributors and registered intermediaries of the regulator to use Aadhaar based e-KYC facility to complete the KYC (know your customer) procedure of their clients.
The circular said, "entities in the securities market, as may be notified by the Central Government, shall be allowed to undertake Aadhaar Authentication under section 11A of the PMLA. SEBI Registered intermediaries for reasons such as online onboarding of clients, customer convenience, increased efficiency and reduced time for client on-boarding would prefer to use Aadhaar based e-KYC facility to complete the KYC of the client."
The regulator further specified that businesses that wish to use the Aadhaar authentication process would have to partner with entities registered with UIDAI as "KYC user agency."
"These entities would be registered with UIDAI as KYC user agency ("KUA") and shall allow all the SEBI registered intermediaries/ mutual fund distributors to undertake Aadhaar Authentication of their clients for the purpose of KYC through them," SEBI said.
"The SEBI registered intermediaries / mutual fund distributors, who want to undertake Aadhaar authentication services through KUAs, shall enter into an agreement with any one KUA and get themselves registered with UIDAI as sub-KUAs. The agreement in this regard shall be as may be prescribed by UIDAI," it added.
Steps for online portal based investors to complete e-KYC process:
- Visit portal of KUA or the SEBI registered intermediary which is also a Sub-KUA to open account/invest through an intermediary.
- For Aadhaar e-KYC, the investor is redirected to KUA portal.
- The investor enters the Aadhaar number or Virtual ID and provides consent on KUA portal.
- The investor receives OTP on his/her mobile number registered with Aadhaar from UIDAI and enters the OTP on KUA portal for Aadhaar e-KYC.
- KUA will receive the e-KYC details from UIDAI upon successful Aadhaar authentication which will be further forwarded to Sub-KUA in an encrypted format (using KUAs own encryption key) and will be displayed to the investor on the portal.
- The investor will fill the additional detail as required under KYC format.
- SEBI registered intermediary will upload additional KYC details to the KUA.