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Paytm Money Clarifies What Their New Mutual Fund Investing Methodology Means

Paytm Money has clarified about how exactly their new backend changes will impact users and what users should do to comply with these changes.

Paytm Money (PML) has extended the timeline for its direct mutual fund users to update their ‘know your customer’ (KYC) status and open a demat account, to October 31, 2022 from the earlier July 25, 2022 deadline.

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The company wrote in an email to its users that it understands how confusing this new change must be, and as such, they are publishing a detailed blogpost regarding what exactly to do in order to continue mutual fund investing with them.

So, what exactly has changed for Paytm Money that they had to take these measures?

What’s Changed For Paytm Money?

Paytm Money has clarified in its email that it was following the Securities Exchange Board of India’s (Sebi) earlier guidelines, which said that mutual fund execution and advisory services could be offered by either a registered investment advisor (RIA) or a broker using an exchange platform.

“Subsequent to a change in regulation, we decided to discontinue offering advisory services, and have to stop using the RIA code, and mandatorily use our broking code to execute direct mutual fund transactions,” read an email from Paytm Money.

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Hence, now Paytm Money needs its users to open a demat account to use its mutual fund services apart from stockbroking, too, as it is discontinuing its RIA code for this usage, and going forward with its stockbroker code.

What Does This Mean For Investors In The Future?

Varun Sridhar, CEO, Paytm Money pointed out in a press release that the new backend technology services which Paytm Money intends to use is the Bombay Stock Exchange’s StAR platform, and that this provides multiple advantages to investors.

“The backend technology integration with BSE StAR provides multiple advantages to our retail investors, and in accordance with the regulatory requirements, investors need to open a demat account and generate a UCC (unique client code) on our platform. The demat account will remain free for life for investments in direct mutual funds,” he added.

What Does This Change Mean For Investors?

A mutual fund unit can either be held in statement of account (SOA) mode or demat mode. SOA mode is when registrar and transfer agents (RTAs), such as Karvy, CAMS, and others send in a statement of account of your mutual fund investments. A demat, on the other hand is when you use your stock broking app or site to buy and hold your mutual fund units. The demat investments can be checked either on your stockbroker’s statement, or by visiting the NSDL or CDSL’s site (depending on your demat provider).

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Here are some additional clarifications that Paytm has provided for its existing users:

Existing Mutual Fund Units: All the existing old Paytm Money users who held their mutual fund units in SOA mode and who do not have a demat account with Paytm Money will continue to hold them in the SOA mode only, i.e., they will not be moved to a dematerialised format. 


Paytm money said they will not charge anything for demat account for direct mutual fund investing, but normal brokerage and charges will apply for stock investment and trading.

“Direct Mutual Fund units will continue to be in SOA format post migration of this process,” read a statement from Paytm Money.

Users who already opened a demat account with Paytm and invested in mutual funds need not take any action, Paytm Money further said.

Charges: Normally, a demat account entails some charges and fees, but Paytm Money has clarified that they will not charge anything.

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“Demat account is free for life as long as it is used only for Direct Mutual Fund transactions,” read a statement from Paytm Money’s blog.

No Action Necessary: Paytm Money has clarified that users need not worry, as all existing SIPs will be processed as per normal timelines, and that investors can view their investments on the app at all times. 

It also clarified that the migration process from RIA code to stockbroking code will involve backend change which will be handled fully by the BSE StAR and Paytm Money team. Hence, users need not redeem or take any action on their portfolio investments.

How To Comply With These Changes?

Paytm Money has said that they have created a completely digital process in order to enable users to comply with this new change. All that a user needs to do is complete his/her KYC and open a demat account with them. 

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Here is a step-by-step process to do that:

Step1: Take a white paper and put your signature on it. Then take a clear picture of that.

Step2: Open Paytm Money App and navigate to the demat account opening tab and then submit this signature picture. After that, click a live photo on the app itself for KYC purposes.

Step3: Check all the details. If satisfied, complete the e-sign process, and that will be all.

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