The Securities & Exchange Board of India (Sebi) has turned down a plea made by mutual fund houses for a phased implementation of PAN (permanent account number) requirement for all fresh purchases made by investors from next month.
The market regulator has rejected the plea in order to stick to the Budget announcement, sources in the mutual fund industry said.
Currently, a PAN card is mandatory for investing Rs 50,000 and above in a scheme. It was felt that several cash-rich investors were misusing the existing rules by investing just below Rs 50,000 per scheme in a multitude of mutual fund products, sources maintained.
Market players feel that only around 12-13 per cent of the nearly three crore mutual fund investor accounts have a PAN. According to industry estimates, only 18 per cent of 300 million bank account holders have a PAN card.
Know your client project
With Sebi’s refusal for relaxation on PAN front, fund houses are now planning an aggressive strategy to bring about an awareness among retail investors to have PAN, alpha-numeric tax assessment number of issued by the Income Tax department, from next month.
 In fact, as many as 30 mutual fund houses have also joined hands for a ‘KYC (know your client) project’ with CDSL Ventures (CVL) to collect and maintain a common data of mutual fund investors such as their name, address and PAN.
 Earlier, in a submission before Sebi, Association of Mutual Funds in India (Amfi) requested for a phased implementation of the mandatory PAN requirement over a period of next six months.
 The fund houses suggested that the minimum amount of investments for PAN be brought down from Rs 50,000 to Rs 25,000 in the first phase, before bringing it down further to include even smaller investments.
The PAN requirement comes into effect at a time when the fund houses are planning aggressive strategy to make inroads into rural areas. Recently, ICICI-Prudential AMC and Reliance Mutual Fund launched a systematic investment plan for as little as Rs 50 and Rs 100, respectively.
Impact on retail inflows
Over 70-75 per cent of retail money comes from small town investors. Now with PAN card becoming mandatory from next month, it will definitely have an impact on the retail inflows from smaller towns, pointed out a top official of UTI Mutual Fund.
 In April, the market regulator issued a circular stating that the permanent account number (PAN) would be the sole identification number for all transactions in the securities market.