AMCs to freeze non-PAN MF folios from April 2023

From April 2023, investors will not be able to invest in mutual fund folios that are not linked to their PAN card, the Association of Mutual Funds in India (Amfi) has said in a notification.

“No investments (systematic or lumpsum) shall be permitted in such folios wherein PAN or PAN exempt KYC reference number (PEKRN) are not available. Dividend pay-out by MF schemes to such folios shall also be disallowed,” Amfi has said.

The industry body has asked investors to link such MF accounts with their PAN or PEKRN by March 31, 2023.

Restrictions on redemptions from such transactions are already in place since September 2019. Amfi had disallowed redemptions from such accounts after the Securities and Exchanges Board of India (Sebi) expressed concerns over the high amount of redemptions from such accounts.

According to a report, as of 2019 there were over nine millions MF folios which were not linked to PAN and most of these folios were over 11-12 years’ old. This is because PAN became compulsory for MF investments only from January 1, 2011, when a new set of know-your-customer (KYC) compliance norms was adopted by fund houses.