With less than a week to go for the mandatory permanent account number requirement for all new investments in mutual funds to take effect, Securities and Exchange Board of India on Tuesday extended the deadline by another six months to December 31, 2007, but the regulator insisted that investors making new investments in MFs should produce proof that they have applied for PAN.

The mandatory requirement of PAN, the alpha-numerical tax assessment number, for mutual fund investments was to have come into effect from next Monday (July 2).

Sebi, however, exempted investors participating in micro-pension schemes from the PAN requirement.

"The Sebi has extended the deadline till December 31, provided the investors attach a proof of their PAN application along with their MF investment form. The whole idea is the investors, with no PAN identity, should apply immediately for the mandatory compliance," A P Kurian, chairman, Association of Mutual Funds in India said.

The capital markets regulator has asked the mutual funds to accept all investments till December 31, giving investors another six months' time to comply with new regulations.

Investors participating in the micro systematic investment plan will also have to follow the PAN requirement from next year.

Under the Know Your Client norms, PAN is currently mandatory for MF investments of Rs 50,000 or above.

Fund houses have expressed concern over meeting the deadline and fear their inflows could narrow down as a  significant number of MF investors do not have PAN. They also fear  loss of inflows from rural and low wage earning classes as fund houses have come out with micro SIP schemes allowing investors invest up to Rs 50 a month.

Amfi had submitted Sebi its view over the issue on June 14. In a reply sent to Amfi, Sebi said: "In order to address difficulty of large number of persons/investors in getting PAN by July 2 deadline, you are advised to bring to the notice of existing and potential investors that they should apply for PAN and such application should be accompanied while investing."

However, industry watchers feel the move might not solve the issue as reaching existing investors and asking them to apply for PAN will be tough job for the fund houses. New investors cannot invest until they apply for PAN for which they have to submit documents such as proof of residence and photo identity.

"The concept of PAN is not prevalent in many sections of society, which are slowly starting to invest in MFs. PAN should have been made mandatory over certain level of investment. This will make products unattractive," Sameer Kamdar of fund distributor Mata Securities said.

The MF industry has been demanding application of universal norms for MFs, insurance and banking sector. The issue was recently raised by UTI MF chief UK Sinha during an industry summit. Sinha, speaking on behalf of the industry sought "level playing field" for the MF industry along with the other sectors. Under the new norms, any investment made into the MF, will have to disclose PAN, while this will not be mandatorily applicable.