With the stock markets zooming to new highs, many people have invested in India’s growth story via the mutual fund Systematic Investment Plan (SIP) route. According to the latest AMFI data the number of folios with 44 mutual fund houses rose to 8,62,56,880 at the end of October.
Now, in a rare case of interoperability between regulators, the Pension Fund Regulatory and Development Authority (PFRDA) has allowed National Pension Scheme (NPS) to use the KYC of investors who have invested in mutual funds for NPS, which is a government-sponsored pension scheme account with a tax saving option under Section 80C.
National Pension Scheme India is a voluntary and long-term investment plan for retirement under the purview of the PFRDA and Central Government.
The regulator has now allowed NPS Points of Presence (PoPs) to use KYC done for stocks or mutual funds for NPS registration through a circular dated September 23. The PoPs can fetch the KYC details of investors from the relevant KRA (KYC Registration Agency).
With digitalization fast catching up people are now very comfortable with opening accounts online and making online payments too. It is important for investors to note that investing in the NPS through a PoP is more expensive than investing directly in the NPS. PoPs charge a fee of 0.25% of every contribution. Which means that for every NPS contribution of Rs 10,000 you will have to pay Rs. 25 as commission or fee.
So the tech savvy people can directly sign up for NPS through a Central Record keeping Agency (CRA) such as NSDL or Karvy. This will help you to save the fees charged by PoPs for contributions.
However, it is important to note that in this case, the benefit of existing KYC for mutual funds will not be available. Nonetheless, the KYC for these type of online registration is relatively smooth and can be completed in a single sitting using your ID, address proof and PAN number and other details.
Many banks in India have registered as PoPs, apart from entities such as Computer Age Management Services (CAMS) and Stock Holding Corporation of India are also PoPs. Also, some fintech players like Paytm and Mywaywealth have also secured an online PoP license. All these will be able to leverage their existing mutual fund clients for onboarding customers into NPS.
