Investing process • PAN/KYC • Demat/Remat • Power of Attorney • NRI accounts • Folio maintenance • Special investor categories • Payment instruments • Documentation • MF via stock exchanges
Individual investors: Resident individuals, Minors (through guardians), HUF, NRIs, FPIs (foreign individual investors). Small ticket size, geographically dispersed.
Institutional investors: Companies, trusts, charitable organisations, societies, financial institutions, pension/insurance funds, banks. Need a formal process — Board/Trustees approve investment decisions; transact through authorised signatories.
SEBI's "Accredited Investors" concept covers individuals, sole proprietors, HUFs, trusts, partnerships, companies meeting net-worth/income/AUM criteria — assumed to have higher risk appetite, get access to specialised products.
Resident Individuals HUF Minors via guardians Societies/Clubs NRI PIO Banks FIs AOP Companies Partnerships Trusts FPIs Insurance Cos Pension Funds Mutual Funds
Subject to limits in SEBI regulations, RBI norms and the scheme's offer document. E.g., NRIs cannot invest in post office small savings schemes; pension plans may have age caps.
Investors must satisfy mandatory regulatory pre-requisites (e.g., KYC compliance) and product-specific conditions (e.g., subscription window for a public issue).
| Field | Key Points |
|---|---|
| Name | Up to 3 joint holders for MF/shares/bonds/demat/POSB; 2 for bank FD/SCSS/NSC; NPS is sole-name. First holder receives all payouts/correspondence and bears tax liability. |
| Signature | Verified for every transaction; all joint holders must sign irrespective of holding pattern. |
| Address | Of first holder; must match KYC address proof. |
| Bank account details | Account no., bank/branch, IFSC, MICR — mandatory for most capital market products; optional for NPS Tier I, mandatory for Tier II; not required for POSB. |
| PAN | Single identification number for capital market transactions; original verified against self-attested copy. |
| KYC Compliance | Status & proof must be furnished at time of investment. |
| Risk Profiling | Mandatory for an Investment Adviser to undertake — basis for selecting suitable investment options. |
A unique folio/account/customer ID is created on the first valid application by the product provider/agent (e.g., R&T agent), capturing name, status, contact, bank details, mode of holding, and nomination. Subsequent ("additional") investments can be made via transaction slips quoting the folio number — no fresh PAN/KYC needed. NPS uses PRAN; securities-market investors can consolidate all holdings into their demat account.
Mandated under PMLA, 2002 — identity verification (photo ID: passport/DL/voter ID/Aadhaar) + address proof (utility bill, ration card, etc.) + PAN where available.
Tools: eSign (under 2nd Schedule of IT Act), Digilocker. An IA wishing to be a sub-KUA (KYC User Agency) must tie up with a KUA and register with UIDAI. SEBI's May 23, 2025 circular mandates inclusive digital KYC for persons with disabilities (incl. visual impairment).
CERSAI notified (Nov 26, 2015) as Central KYC Record Registry under PML Rules 2005 — stores/safeguards/retrieves digital KYC records, issues a unique KYC Identifier after de-duplication, and serves Reporting Entities of RBI, SEBI, IRDAI & PFRDA (operational since 2016). RIs must upload KYC of individual accounts opened on/after 1 Aug 2016. Re-submission of documents needed only if information changes, address re-verification is required, or enhanced due diligence is warranted.
A depository (NSDL, CDSL — under the Depositories Act, 1996) holds securities electronically, like a bank holds funds. Public issues exceeding Rs. 10 crore must be in dematerialised form. Dematerialised securities are fungible and identified via ISIN (12-character code). Physical transfer of shares discontinued from 1 April 2019.
No stamp duty on dematerialisation. DRFs stored ≥ 5 years. Rejection grounds: mismatch in details, fake/stolen/duplicate certificates, name/signature mismatch, securities not pertaining to issuer.
RRF carries: holder name(s), signature, number of shares, address, bank details, PAN, age, tax status, nominees.
A PoA has a grantor (investor/account holder) and an attorney/holder (authorised agent). Both must comply with PAN/KYC. The PoA holder may transact (purchase, payment, sale, settlement, redemption) but cannot open/close bank or demat accounts, appoint or change a nominee. The grantor can continue operating the account.
No PoA is possible for a minor (cannot contract) — the guardian performs an analogous role.
Broad authority — banking/transactions, filing tax returns, buying/selling/managing property, entering contracts, settling claims. Used when investor is travelling or unwell.
Authority limited to specific act(s) clearly designated — e.g., for a defined task during illness, disability or travel.
Resident if: (1) in India ≥182 days in the previous year; OR (2) ≥60 days in the previous year AND ≥365 days in preceding 4 years (exception for citizens/PIOs visiting India). Person of Indian Origin (PIO): held an Indian passport, or grandchild of Indian citizens, or spouse of an Indian citizen/PIO.
Repatriability: Foreign-currency-sourced investment → freely repatriable; Rupee-sourced → non-repatriable (rupee not fully convertible on capital account). Sources cannot be clubbed.
| Source Account | Repatriation Limit |
|---|---|
| NRO Account | Up to USD 1 million per financial year |
| NRE / FCNR / FIRC-supported foreign draft | Freely repatriable, no limit |
All income earned in India (interest, rent, dividends) is freely repatriable after taxes; sale proceeds of capital assets repatriable to the extent of funds originally remitted from abroad.
FATCA/CRS: Mandatory self-declaration since Jan 2016 (Rules 114F–114H) — name, PAN, address, place/country of birth, nationality, income, tax residency, UBO (for entities).
RBI scheme — mandatory for NRIs/PIOs trading listed shares/convertible debentures/MF units on Indian exchanges. Opened only at designated AD bank branches; one NRE(PIS) (repatriable) + one NRO(PIS) (non-repatriable) account allowed. Documents: passport, work permit/visa, PIO card, address proof.
Investment ceilings: NRI ≤ 5% of paid-up capital (overall NRI cap 10%, raisable to 24% by special resolution); debentures similarly capped at 5%/10%.
Capital market changes route through the KRA via the KYC Details Change Form + documentary proof; mere intimation to AMC/R&T/DP/broker is not sufficient. NPS uses Form S2. Change of status (Resident→NRI or vice versa) requires re-designation of bank accounts (to NRO/Resident Rupee a/c), fresh demat/trading accounts, and KRA notification to all participants.
Investments (shares, MF units, FDs, insurance policies) can be pledged as collateral. Lender creates a lien/charge; investor cannot redeem pledged securities. Recorded by provider; appears in account statement. Unmarking requires the lien holder's written authorisation. Lien holder can invoke the lien (sell/redeem) to recover dues — no transfer of ownership occurs first.
| Holding Pattern | Outcome |
|---|---|
| Joint, no nomination | Transmitted to surviving joint holders (2nd holder becomes 1st) |
| Joint, with nomination | Joint holders' right supersedes the nominee's |
| Single, with nomination | Transmitted to the nominee |
| Single, no nomination | Transmitted to legal heirs/claimants on proof of succession |
| HUF Karta deceased | New Karta on indemnity bond signed by co-parceners |
Simplified documentation thresholds: physical securities — Rs. 5 lakh; dematerialised securities — Rs. 15 lakh (death certificate, indemnity letter, NOC from other heirs suffice). Typical documents: death certificate, probate/succession certificate, relationship proof, indemnity bond, NOC, new holder's bank/KYC details.
Transfer of rights/property to another person — can be conditional (e.g., on early death) or absolute (e.g., to a lender, irrevocable). Done via endorsement on the policy or a registered deed of assignment.
Minor = under 18; cannot contract; guardian (natural/court-appointed under Guardians and Wards Act, 1890 / Hindu Minority and Guardianship Act, 1956) transacts on their behalf. Investment must be sole/first-named; no joint holding with guardian beyond what's allowed; guardian's PAN & KYC required.
On attaining majority: folio is frozen until KYC redone (fresh proof of identity/address, banker-attested signature); new demat account required (old one closed); PAN reissued with new signature; SIP/SWP/STP suspended if status-change documents not submitted by the date of majority.
NRI→RI: Cannot operate NRO/NRE/FCNR(B); open Resident Rupee Account (and optionally RFC account for foreign currency); new 'Resident' demat & trading accounts (balances transferred, old closed); inform AMCs/KRA.
RI→NRI: Open NRE/NRO accounts; convert FDs to NRO FDs; new NRI-status demat (non-repatriable) & trading accounts (often higher brokerage); inform AMC/KRA — TDS becomes applicable on MF gains.
Bank account: simple application + KYC of new holder + updated specimen signature card. Mutual funds: not allowed directly (amounts to a transfer) — solution is to open a new folio and switch holdings.
Form + cancelled cheque required for trading/demat/MF folio changes; multiple bank accounts can be linked but one is designated the main/payout account.
Local/At-Par cheques, Demand Drafts, Post-dated cheques (SIP only), Standing Instructions, Cash (limits apply).
NACH, RTGS, NEFT, ASBA, UPI, AEPS, National Unified USSD Platform, e-wallets, Debit cards, internet banking transfer.
MFs: ≤ Rs. 50,000 per investor per fund per year (since Sept 2012, PMLA-compliant); redemptions/dividends only via banking channels.
| Mode | Key Feature |
|---|---|
| ASBA | Blocks funds in account; debited only on allotment; money continues to earn interest; eliminates refunds |
| RTGS | For Rs. 2 lakh & above; real-time settlement; charges Rs. 5–55 |
| NEFT | No minimum amount; batch settlement; charges Rs. 5–25 |
| IFSC | 11-digit alphanumeric; first 4 letters = bank, last 7 = branch |
| MICR | 9-digit code: city (3) + bank (3) + branch (3) |
Payments must come from the first holder's own account. Exceptions for MF investments: grandparents/parents paying ≤ Rs. 50,000 per transaction for a minor; employer payroll deductions; custodians paying for FPIs — each requires a third-party declaration form + payer's PAN/KYC compliance.
Per SEBI (Investment Adviser) Regulations, 2013, the adviser must: (1) execute a signed agreement with scope, remuneration, good-faith undertaking; (2) collect & document client information (age, income, assets, liabilities, goals); (3) conduct & record risk profiling; (4) document the product short-listing rationale and suitability reasoning; (5) record the advice given; (6) maintain proof of pre-investment requisites (KYC, demat, NRI accounts, etc.) and post-investment records (statements, proofs) — physically or digitally signed electronic form — for 5 years.
SEBI permits MF distributors (registered with AMFI) to use recognised stock-exchange infrastructure: BSE StAR and NSE NMF II. Units are bought/sold from AMCs directly; pay-in/pay-out through exchange/clearing-corporation infrastructure, eliminating counterparty risk. Supports SIP, STP, SWP and switches; investments can be in demat or physical form; online mode needs no document submission.
1. With effect from January 1, 2016, payment for applications in a public issue must mandatorily use which facility?
2. The micro-investment exemption from PAN in mutual funds (up to Rs. 50,000 aggregate) is available to:
3. Which entity has been authorised as the Central KYC Record Registry (CKYCR) under the PML Rules, 2005?
4. A Power of Attorney holder is NOT permitted to:
5. If an investment account was held singly by the deceased and had a valid nomination, the investment is transmitted to: