Big Story | Unlock your investment plans from home

Equity: Make the best of tech tools

Are you raring to try your hand at direct-investing?

The good news is that you can complete all the procedures involved in opening a trading and demat account without leaving your home.

There are many stock brokers who facilitate the opening of a trading account online. Most brokerages offer a demat-cum-trading account, as a demat account is mandatory to store securities.

The first step in opening a trading account is carrying out the know-your-customer (KYC) process.

Some firms such as ICICI Securities, Kotak Securities and IIFL send a representative to your house with the account-opening and KYC forms. Others allow you to submit the documents (including the KYC form) through post without the requirement of you visiting the firm’s office.

You can also open a trading account online either using the broker’s web portal or app (if any). The KYC process can be completed with the help of technological tools or platforms such as DigiLocker (for submitting valid original digital documents), Immediate Payment Service (IMPS - for penny-drop bank validation), Video In Person Verification (VIPV) and eSign (to digitally sign a document).

DigiLocker accounts can be created online using your Aadhaar number and registered mobile number. Once a DigiLocker account is opened, an individual can access documents or certificates such as Aadhaar, driving licence and vehicle registration issued by government departments. You can also upload your other official documents into the account and provide its access to others. Using this, you can submit the required documents, which are deemed to be at par with original physical documents and are acceptable for the KYC process.

eSign is an online electronic signature service in India to facilitate an Aadhaar holder to digitally sign a document using an OTP (one-time password). You can eSign to authenticate documents and this shall be accepted in lieu of a wet signature on the documents.

One of the prerequisites to open a trading account is having a bank account, from which money will be debited or credited for the transactions carried out on the trading account.

Once you provide your bank account details, the firm can verify them through the penny-drop mechanism that includes depositing some trivial amount into your bank account.

When you open a trading account with a stock broker (for example, ICICI Securities) and if you hold a bank account with its banking arm (here, ICICI Bank), you can skip the KYC process for opening the trading account because you are already a KYC-compliant customer with the bank.

In-person verification which is usually the last part of a KYC process can also be done through VIPV. VIPV includes the firm’s representative asking random questions, you displaying official documents, the KYC form and a signature or confirming the OTP sent. This is to ensure that the photograph submitted with the documents matches with the person in the VIPV.

Finishing the KYC through the above tools is just one way. Firms may have other means to allow customers to submit KYC documents online.

Recently, SEBI came up with a circular further easing the KYC process in which an individual can bypass DigiLocker/VIPV if she submits Aadhaar, which can be verified through UIDAI’s (Unique Identification Authority of India) authentication/verification mechanism. However, we may have to wait for some time for all the firms to adopt this process.

While providing PAN (Permanent Account Number) is not mandatory for the KYC process, it is mandatory for doing transactions in the securities market.

Fixed deposits and bonds: Opt for non-face-to-face mode

In this low-interest-rate environment, most of us look out for banks offering the best interest rate on fixed deposits. If you find one, there are a few options to open an FD account online without stepping out of the house.

If you have a savings bank account in the bank in which you want to start an FD, opening an online FD account is easy, using net banking or mobile applications.

Banks also do not want to lose a customer on account of not having a savings bank account, and are wooing them by making the savings or FD account-opening process simpler by sending representatives to the customer’s location to collect all the required documents and complete the in-person verification.

For this, you just need to call the bank’s customer care, after which you will be briefed on the procedure and the documents to be submitted.

If you wish to have no contact even with the representative of the bank and want to open an FD account quickly, there’s another option.

The RBI allows the non-face-to-face mode to open bank accounts provided there is an OTP-based e-KYC validation.

However, the aggregate balance of all the deposits in such accounts should not exceed ₹1 lakh.

Most banks — private as well as public ones — including Bank of Baroda, State Bank of India, Axis Bank, HDFC Bank and ICICI Bank allow customers to open instant savings account digitally. You just need to provide your mobile number, Aadhaar number and PAN .

Once a savings account is opened, you can open a FD account using the net banking facility.

Note that within one year of opening a digital savings account, you need to visit the bank branch, upon which the full KYC will be completed.

Otherwise, the account will be blocked. On finishing the full KYC, your digital account will be converted to a regular savings account and there will be no restrictions.

In a welcome development, the Reserve Bank of India in January updated the ‘Know your Customer (KYC) Direction, 2016’ to treat video-based customer identification process — audio-visual interaction with the customer to obtain identification information including the documents — as valid as the face-to-face verification process. If the bank does a video-based KYC, you can open a regular bank account, instead of a digital account, online.

But not all banks currently provide this facility. Only a few such as AU Small Finance Bank allow opening a regular savings/FD account online.

You can also invest in most of the corporate FDs online. NBFCs or corporates issuing FDs usually depend on the verification done by third parties such as banks, which is allowed by the RBI.

In addition to regular KYC documents, corporates/NBFCs also ask for a cancelled cheque from the customer for opening a deposit account.

Bonds: Use your trading account

In addition to FDs, you can buy other fixed-income products — bonds — too, online.

Take the case of government securities (G-Secs). Some part of G-Secs issued through non-competitive auctions conducted by the RBI is reserved for retail investors. ICICI Securities, Zerodha and NSE’s goBID (Government Bond Investment Destination) are a few options through which retail investors can use their demat accounts to invest money in treasury bills and various government bonds/securities. If you want to sell these securities, you need to reach out to your broker. This also can be done without going to the broker’s office.

Through your trading account, you can also buy corporate (including NBFC) bonds and sovereign gold bonds. Note that not all stock brokers provide this facility for all bonds issued in the primary market.

However, you can buy and sell these bonds in the secondary market using any trading account.

If you want to purchase the capital gains bonds issued for the purpose of Section 54 EC of the Income Tax Act or the savings bonds issued by the RBI, you can apply online through the Stock Holding Corporation of India.

Mutual funds: Direct or regular, go online

For those restricted by the lockdown and looking to invest in mutual funds, you can do so broadly in two ways — through intermediaries or directly through the mutual fund house. Thanks to the advent of technology, these modes allow investors to sit at home and invest in mutual funds based on their comfort level and choice.

As required by the market regulator SEBI, mutual funds come in two categories — direct and regular. Investors will get the units of regular plans if the investment is routed through an intermediary. The intermediary could be an online or an offline player, including brokers, banks and various distribution platforms. The intermediary gets paid a commission from the mutual fund house for this service.

In direct plans, the investment is made directly with the mutual fund company.

When you invest in the direct plans of mutual fund schemes, your returns will be better than that of the regular plans. That’s because the expense ratio of direct plans is lower than that of regular plans, as you save on the commission paid to intermediaries.

Direct plans can be bought through the websites of the asset management companies (AMCs). Some fee-based and non-fee-based online distributors also enable investors to buy direct plans.

It makes sense to go for direct plans than regular plans. But direct plans are typically suitable for financially savvy investors who can make their own decisions on when, where and how to invest, shift and exit.

You will have to complete KYC formalities before you can start investing, as mandated by SEBI.

Through intermediaries

Demat account: In case you have a demat account with a brokerage, you can buy mutual fund units through this service.

Almost all brokerage services allow investors to buy mutual fund units through demat accounts. There is usually a separate tab or screen that allows you to search the mutual fund scheme and place orders online.

An investor can also set up systematic investment plans (SIPS) through a demat account. Most banks also enable customers to buy mutual funds through their websites.

MF aggregators: You can also invest through mutual fund aggregator platforms. Platforms such as FundsIndia and Fisdom aggregate all mutual funds and enable investors to invest in regular plans. Investors will have to set up an account on these platforms and then set up their bank mandate, which is usually a one-time process.

There are other digital platforms that allow you to invest free of cost in direct plans, such as Paytm Money, Groww and Kuvera.

Keep in mind that it is better to keep the maximum transaction limit of your bank mandate as high as possible to accommodate any future increase in mutual fund investments.

MF Utility: You can also invest through MF Utility, a portal promoted by the Association of Mutual Funds of India (AMFI).

You need to set up a Common Account Number (CAN) on the MF Utility website ( www.mfuindia.com ).

Select the electronic CAN option (eCAN) to opt for the purely online procedure to set up an account on MF Utillity. eCAN is available to those investors who have already completed the KYC process with a KYC Registration Agency (KRA) and have an existing folio with a mutual fund.

If not, you can opt for the partially electronic CAN where you submit all your information online. After completion of the process, a pre-filled eCAN registration form is generated which has to be physically submitted along with other documents to a MF Utility-authorised entity or points of service. This can be posted or couriered to their offices.

After setting up the CAN on MF Utility, an investor can choose to invest or set up SIPs in most mutual schemes available in the market.

The advantage of using CAN is that you can invest in all mutual fund schemes that are available on the MF Utility platform at one place with a single bank mandate registration.

Investors can transact in both direct and regular plans through the MFU platform.

RTAs: Similar to MF Utility, you can also invest in direct plans of mutual funds through registrar and transfer agents (RTAs) of mutual funds — Computer Age Management Services (CAMS) and KFintech. The two RTAs service different mutual fund players. To invest in the mutual funds that they service, you can set up an account on their respective websites or mobile applications.

Through MF websites

To invest through a mutual fund website in direct plans, you will first have to set up your account and complete the KYC process if necessary.

After that, you will have to register your bank account with the mutual fund and set up a bank mandate. Almost all mutual funds provide this facility.

Many mutual funds also allow investors to invest through the Unified Payment Interface (UPI).

If the fund of your choice allows this facility online, either on its website or through intermediaries, the bank mandate registration process becomes less cumbersome.

Insurance: Get cover virtually

Purchasing insurance online is a simple process. Insurers have made the on-boarding process quick and convenient with minimal documentation requirements. But note that online purchase is recommended only for savvy individuals who understand insurance and can make their own choice.

If you cannot evaluate the risks and benefits by yourself, you should take the help of an agent or an online aggregator, which can help you compare different plans and guide you through the buying process.

That said, in life insurance, the term cover, and in health insurance, the plain-vanilla indemnity cover have mostly standardised features which are easy to understand and can be purchased online.

Why go online

Every insurer offers a quick and easy online process for buying insurance. One of the key benefits of buying an insurance policy online is savings on premium.

Insurance companies pass on the savings on agent commission to customers by giving discount on premium for policies sold online.

For instance, Bajaj Allianz Life offers a discount of 3 per cent for online purchase of term plans. LIC, too, offers reduction in premium if the cover is purchased online.

In health insurance, too, you can get discount on premium if you buy the policy online. There will be discounts also for buying family floater plans, and based on your age. For instance, Max Bupa Health offers a discount of 5-12 per cent on premium for purchases made online, and an additional 10 per cent if health policies are purchased before 35 years of age.

If you have some challenge in the online process, you can also directly contact the insurer. Most insurers are equipped with chatbots or online chat services to guide you in buying a policy. For instance, Bajaj Allianz Life offers a live chat service that helps in online purchase.

However, not all life policies of the insurers are available online.

For instance, LIC offers only six of its policies online; the rest have to be purchased via agents.

And in case of endowments insurance plans where the products are complex, you may need the support and advice of an agent to understand the plan features, returns from the plan, periodicity for receipts of maturity proceeds, premium payment tenure, suitability of the plan and charges.

And in such cases, you should not buy online simply because it saves you a few thousands on the premium.

Procedure

To buy a life insurance policy online, first, you should visit an insurer’s or aggregator’s website and fill in the basic details — name, date of birth, smoking/tobacco habits, occupation, phone number, email, etc.

Next, from the list of plans displayed, select a suitable plan based on features and premium. Decide carefully after reading through the details, including exclusions.

In health insurance, you will have to decide between an indemnity and a critical illness policy based on your need.

Once you have selected a policy, you will have to answer a few health-related questions. Since the outbreak of the pandemic, most insurers have a Covid-19-related questionnaire which asks whether an individual has travelled outside of India in the last 45 days and if he/she or any of his/her family have tested positive.

Some insurers do a quick background medical check with questions such as history of diabetes, heart diseases, surgery or organ transplant. I

f you happen to be over 55-60 years or have some existing medical conditions such as diabetes, you may be asked to undergo a medical check-up.

Given the current restrictions in movement, life/health insurers provide options to do tele medicals, where healthcare professionals speak to you over the phone and diagnose your health conditions. However, if you don’t want to take a chance and have a smooth claim process in future, you can do the regular medical check-up.

You will be required to submit your photo, identification proof, PAN card, address proof (passport or Aadhar card or driving licence), income proof (salary slips for last three months, income tax returns for last 3-5 years, Form 16, or six months’ bank statements).

In health insurance, you may have to upload previous medical documents.

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