One of India’s largest direct mutual fund (MF) platforms, Paytm Money, has started migrating customers to its brokerage business.

Paytm Money, which launched in September 2018 and crossed 6.6 million users in 2020, had in an email to customers on July 4 asking them to comply with additional Know Your Customer (KYC) standards. as part of the platform’s transition to the services of BSE StAR, an MF transaction platform. This change implies that users get a unique customer code (UCC) and a demat account. Users must complete the additional KYC steps by July 25 or will be prohibited from making new investments through the platform.

The move is likely to help Paytm Money cross-sell in intraday trading, in addition to futures and options as well as delivery-based trading to its MF customers. Currently, Paytm Money charges brokerage fees of 0.01% on each executed order involving the delivery of shares, and a minimum of 0.05% of turnover, or 10, on intraday transactions. The company deducts at least 0.02% of turnover, or 10, by order executed on intraday and reported transactions on equity futures contracts, and 10 per order executed in options. As in the past, Paytm Money will not charge investors for their MF transactions.

Demat the accounts

According to the company’s communication, the failure of its customers to migrate to a demat account by July 25 will mean that their future investments in MFs, including through SIPs (systematic investment plans), and redemptions will be stopped until the KYC process is complete.

Any action related to past investments of the FCP after July 25 must be initiated on the site of the AMC (portfolio management company). Clients will still be able to access their portfolios and see the status of their investments. To complete the migration to a demat account, users must also upload an image of their signature on a blank piece of paper, in addition to a photo (clicked through the Paytm Money app). The whole process can be completed online and may take no more than a few minutes.

“Since inception, Paytm Money has been executing direct MF transactions for thousands of retail investors with our RIA (Registered Investment Advisor) code and using our own technology platform. We are migrating to a new platform and our transactions will use our brokerage code instead of the RIA code.To ensure the longevity of the Investor Savings Plan, all investors are required by regulation to have a UCC code.Therefore, they are required to update their KYC and complete the demat account application form,” said Varun Sridar, CEO of Paytm Money.

“We have waived all fees and commissions for this demat account as long as clients only invest in mutual funds. In addition, MF units will continue to be in statement of account (SoA) form and not in demat form. Only if investors transact in shares will they be charged at the current share price, which is very competitive anyway,” Sridar said.

“After initiating the migration process, many clients have already completed opening their demat and KYC account to the BSE StAR MF platform. We are extremely grateful to those investors who appreciated our transparency and recognized our efforts to help them earn 1% higher returns by investing in direct mutual funds compared to regular mutual funds.We continue our journey to achieve financial inclusion and build the world’s most loved wealth management platform. India,” he added.

What are your options

If you want to continue using Paytm Money for MF, you will need to complete KYC and migrate to the brokerage side of Paytm Money. The company assured users that there would be no cost to MF investors in this process.

Yet clients are not forced to migrate to brokerage. They can continue to make new investments, redemptions and SIPs directly from the websites of the relevant AMCs. The firm also allowed clients to file redemption requests on its platform before July 25, which will be processed within three trading days. Note that this may trigger an exit charge and have tax implications.

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