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From July 1, 2022, mutual fund purchases shall not be made through pool accounts of brokers and other investment platforms and redemption proceeds should directly be transferred to investors’ bank account. SEBI has taken this step to make such transactions safer for investors, as in the past, there have been instances when investors’ hard-earned money lying in broker’s accounts have been misused. Given the new rules, brokerages and other investment platforms are sending out information to investors on how they will be going about investing the money and what investors need to do.
Note the changes
For SIPs to continue as usual, investors going through apps such as Groww, Zerodha Coin, for instance, will have to sign up for fresh mandates through National Automated Clearing House (NACH) as per information put out by them. This needs to be done online for auto debit of money from your account towards the investment. Lump-sum investments can be made using net banking or UPI. Further, it is mandatory to use two-factor authentication for the redemption transaction of units.
For Groww users, as mentioned in their blog post, instead of using funds lying in ‘Groww Balance’ which is not allowed now, one can make lump-sum and SIP investments directly through bank account using Net banking or UPI. One can use Autopay feature for further SIP instalments provided the NACH mandate requirement is met. If the Autopay doesn’t get approved in time for your next SIP instalment, you will need to use use UPI/Net banking only and manually invest on your given SIP dates. One can see all its pending SIP instalments due for payment on dashboard and can directly pay from there. Groww investors should remember this and check for enablement of auto pay feature. If not, they will miss their monthly instalment.
For users of Zerodha Coin, funds would be transferred to its trading account earlier, and from that investments were made into mutual funds. From now on, lump-sum investments can be done through UPI or Net Banking. For SIPs, investors will get a payment link on e-mail on specifically-scheduled dates for respective SIPs. This will be a bit of a cumbersome process for investors as, till now, Coin investors had the convenience of auto-debit feature for SIPs. Currently, Zerodha Coin is working to provide the feature, but it is not yet available.
Paytm Money has gone for a completely different route. They are urging their MF customers to be shifted to their broking business, wherein they will open demat account and thereby comply with additional KYC norms under BSE StAR MF. BSE StAR is an MF platform which acts as an aggregator in collection of clients’ MF orders and funds from distributors and registered investment advisors (RIA), among others. When Paytm Money clients shift, investments will continue to be under direct plans and the funds will continue to be held in the Statement of Account (SOA) format.
For a a broker like HDFC Securities, earlier the funds used to be pooled at trading account level from where it would be sent to the clearing house and then to the AMC via BSE StAR MF Platform. Currently, if a customer has HDFC three-in-one account (savings, trading and demat account), then for both SIP and lump-sum investments, amount shall be transferred from the savings account and then directly to the clearing house and from there, the AMC. Under this scenario, investments can be done in a seamless manner. But those having bank account in another bank and trading account at HDFC Securities will face challenges, as, currently, they neither would be able to invest by way of lump-sum nor through SIPs. For such customers, HDFC Securities is attempting to bring a solution by July 15, 2022, they say.
ICICI Direct has put out on its website that the ‘allocation/wallet’ mode has been disabled for non-ICICI Bank account holders from July 1, 2022. These investors are advised to change payment mode of the ongoing SIP to UPI or bank mandate; for lump-sum investors, payment modes change to UPI or Net Banking.
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