The clock is ticking as the September 30, 2023 deadline for updating mutual fund (MF) investment nominations inches closer. However, a significant number of investors are yet to complete this crucial task. According to a Moneycontrol report, a staggering 25 lakh Permanent Account Number (PAN) cardholders have not updated their nomination details. What makes this situation even more complex is the likelihood that many of these PAN cardholders have investments spread across multiple mutual fund (MF) schemes.
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Notably, the Securities and Exchange Board of India (SEBI) has made it mandatory for all mutual fund investors to either furnish nomination declarations or opt out of nominations by September 30. If investors miss the deadline, SEBI may freeze debits from their holdings. This means investors won't be able to withdraw from mutual funds.
Existing investors who have already provided nomination details are not required to resubmit details. Those who have not submitted nomination details to date and intend to submit their nomination or opt out of nomination should do so.
Importance of nomination
Nomination is a facility that enables an individual unitholder (including sole proprietor of sole proprietary concern) to nominate a person, who can claim the units held by the unitholder or the redemption proceeds thereof in the event of death of the unitholder. Without nomination, the investments may be subject to lengthy and potentially costly legal procedures.
The concerns
Mutual fund distributors (MFDs) have shed light on several obstacles that investors encounter while updating their nominations, particularly in cases of jointly-held investments.
Updating the nomination for such folios on platforms like CAMS ( a mutual fund transfer agency) and KFintech (an RTA) requires the consent of all joint holders, whether done online or through physical form submission. This consent often relies on OTP-based authentication, and without contact details (email ID and mobile) for all holders or incomplete KYC records, online updates become impossible. In cases where even KYC records lack contact details, the only option is submitting a physical nomination form.
Issues arise when investors attempt to update their nominations offline through physical forms. Signature mismatches have been a common reason for form rejections, a particular concern for senior citizens whose signatures may have changed over time, as per Moneycontrol report.
To address this, investors can submit a 'Banker's Attestation of Signature' form signed by their folio-linked bank branch to the respective RTA or fund house.
Senior citizens and NRI investors, who may lack an active Indian mobile number, could even face difficulties in nomination updates. In such cases, investors have two choices — online or offline. If online is not feasible, the hard copy of the nomination form must be submitted.
Users have even pointed out different issues related to nominations on their X (formally Twitter) account. A user said he can't see any possibility of adding mother-in-law as nominee on the KFintech platform.
1) Process for mutual funds serviced by CAMS RTA
- Link;https://t.co/tOLzSRg0X3& Click on Nomination Opt-In / Opt-Out- Enter your PAN- Choose 'How do you want to receive OTP?- Then, select Mobile no. registered in the folio(s) where you wish to update Nominee details. pic.twitter.com/8Lsu2HHjEJ— Amol Joshi (@AmolPlanRupee) September 20, 2023
How to nominate?
Investors can submit or withdraw their nominations via two-factor authentication login on trading platforms for stock brokers or depository participants that offer such a service. The details previously required, like mobile number, e-mail ID and identification details of the nominee/guardian of the minor nominee, have been made optional. There is a declaration form which should be signed by the account holder.
Nomination or declaration forms can also be filled online using the e-sign facility which does not require a witness signature unless the account-holder uses a thumb impression instead of a signature. Investors can visit the National Securities Depository Limited (NSDL) website and use the 'online nomination option.'
A person can nominate up to three persons, and clearly indicate the percentage of allocation/share in favour of each of the nominee against their names, and such allocation/share shall be in whole numbers without any decimals. In the event the percentage of allocation/share for each of the nominees is not specified, the asset management company (AMC) will settle the claim equally amongst all the nominees.
Investors with investments across multiple fund houses can simplify the process by downloading nomination forms from the relevant RTA websites and submitting them to the RTAs or each fund house.
(Edited by : Shoma Bhattacharjee)
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