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PAN, MIN, UIN. . . what's next?
Kayezad E Adajania, Outlook Money | February 07, 2007
Last week I went to collect my Mutual Funds Identification Number at Karvy's Mumbai office. My turn came after an agonising wait of 40 minutes - there was no electricity for that time.
I got my MIN after two more visits and a week later, though the rules make me eligible for a MIN across the counter. Why? Because the Internet connectivity at the Central Depositories Services - the industry-appointed central agency in charge of issuing MINs, I was told, was constantly poor.
A total of only 37 officially-appointed Points of Service, across the country, to issue MINs, an average processing time of 20 minutes per application and Internet connectivity issues are making matters worse.
The Indian mutual fund industry boasts of 26.7 million folios. Assuming one investor has, on an average, four folios, there must be around 6.68 million MF investors. Even if 30 per cent of this population invests more than Rs 50,000 in MFs, around 2 million MINs need to issued. So far, only 20,000 MINs have been issued.
MIN is now necessary because under the Prevention of Money Laundering Act, 2002, MFs are required to know their investors better through Know Your Customer guidelines to prevent money laundering. According to an International Monetary Fund report, the aggregate size of money laundering in the world could be somewhere between $590 billion and $1.5 trillion.
Fallacies. I do not have a problem with authorities wanting to know us better. The problem is that the government keeps issuing identity cards and demands the same set of documents (proof of identity, address) every time it does so.
It's good that MFs have jointly appointed a common agency to issue MINs that investors can quote across mutual funds. My question is: what if tomorrow the Insurance Regulatory and Development Authority wakes up and starts issuing another number for insurance investments? How many more 'identity numbers' would investors need to procure in the future? A separate number for each investment avenue?
Double whammy. Note that although the Government of India had passed the Act in 2005 and market regulator Securities and Exchange Board of India had issued a circular in January 2006, about MFs having to implement KYC norms, it was only in December 2006 that MFs intimated investors about MINs to be imposed from 1 January 2007 - barely a week away; pending which their investments would be in limbo.
But the Association of Mutual Funds in India and MFs are not to be blamed. Amfi chairman A.P. Kurian says that they were in talks with Sebi to do away with the KYC norms since MFs do not accept cash payments and instead impose a bank mandate. And banks already follow the KYC norms. Much of the time was wasted in seeking a clarification, and Sebi could do little as the Act had already been passed.
The sheer number of such 'identity numbers', in the meantime, only keeps increasing. First, there was the PAN card. Here too, the government seems to have botched up as many investors have been issued duplicate PAN cards. In 2005, Sebi imposed the Unique Identification Number based on biometrics that took our fingerprints.
After much fanfare, UIN was discontinued even after thousands of investors had procured it. Now comes MIN. (By the way, you can give UIN as proof of identity as part of your MIN application despite its discontinuance.)Even after gaining independence 60 years ago, our administration's obsession with documents and papers continues. The simple solution is to accept PAN as the common identity, and let investors quote just this number on all their investment forms.