Under the proposal, mutual fund folios will be activated only after the Know Your Client (KYC) verification is successfully completed and marked compliant in both the Asset Management Company (AMC) system and the KYC Registration Agency (KRA) database. Investors will be allowed to begin transactions once this verification is confirmed.

SEBI noted that the current sequential verification process sometimes results in KYC non-compliant folios, leading to delays in transactions, non-receipt of redemption proceeds, and an increase in unclaimed dividends. The proposed framework seeks to eliminate these gaps by introducing a uniform and technology-driven process for all fund houses.

The regulator said the standardisation would help reduce investor inconvenience and operational challenges faced by mutual fund companies. A detailed procedure for the new process is outlined in SEBI's draft circular titled 'Process for Opening of Mutual Fund Folios and Execution of First Investment.'

SEBI has invited public comments on the proposal until 14 November 2025, which can be submitted through its official website's online feedback form. The regulator urged investors, intermediaries, and industry participants to share suggestions on the draft framework before it is finalised.

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