While mutual funds are open to a wide range of investors in India, there are certain categories of people and entities who are not eligible:
- Individuals or Entities Without KYC Compliance
If you haven’t completed the mandatory Know Your Customer (KYC) process, you cannot invest in mutual funds. SEBI regulations require verified identity and address before any investment is allowed.
- Fictitious or Benami Accounts
Investments cannot be made under fake, proxy, or unverifiable names. Only genuine investors with proper documentation can participate.
- Foreign Nationals (Non-NRIs/non-PIOs)
Except for NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origin), foreign nationals are generally not permitted to invest in Indian mutual funds, unless specifically allowed under RBI/SEBI guidelines.
- Entities Restricted by Law or Regulations
Some organizations, like specific trusts, societies, or bodies governed by FEMA/RBI restrictions, may not be allowed to invest if their bylaws or regulations prohibit such activities.
- Category III Alternative Investment Funds (AIFs)
SEBI regulations do not allow Category III AIFs to directly invest in mutual funds, except for temporary holding in liquid funds under strict conditions.
- U.S. Persons and Certain Overseas Investors
Due to compliance issues with FATCA/CRS, many Indian mutual funds restrict U.S. residents and some other overseas investors, unless a particular scheme explicitly permits them.
- Entities Without Proper Authorization
Companies, societies, and trusts cannot invest unless their board of directors, trustees, or governing body has passed a valid resolution authorizing such investments.
- Minors Without a Guardian
Minors can only invest through a legally recognized parent or guardian. Direct investments in their own name are not allowed.
- Pooling of Investor Money
SEBI prohibits pooling of funds through brokers or platforms. Money must flow directly from the investor’s bank account to the mutual fund.
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