Paytm Money announced on July 4th 2022 that it will stop offering advisory, surrender its SEBI RIA license and become a broker for direct mutual funds via BSE StAR. So existing investors will have to get their KYC information re-verified once again if they wish to continue investing via Paytm Money.
Paytm Money has clarified that investments in mutual funds will continue to be in a non-demat format and the demat account will not have charges unless investors use it for buying stocks or bonds.
Although the re-verification of KYC is an unnecessary regulatory hassle, the terms of the switch (as of now) are reasonable for pure MF investors provided the new mutual fund units are also in non-demat form. There is however a risk that Paytm Money may alter the terms of engagement in future.
However, the motive behind the switch is not clear. It is possible that Paytm Money believes that many of its users will actively use the demat account for trading which can help turn around the fortunes of One97 Communications which is not yet profitable.
What should Paytm money investors do?
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If the terms of the switch are acceptable to you, confirm from their support that existing and fresh MF units purchased after July 25th will be in non-demat form. That is at any time after July 25th all units will still be available for redemption directly via the AMC or RTA portals.
Once this is confirmed you can proceed with the KYC updation.
If a clear confirmation is not obtained from Paytm Money, do not proceed with the migration.
If you are not comfortable with this development and do not wish to continue with Paytm Money, you have two options.
(1) if you hold only a few funds (esp. index funds) you can consider transacting with individual amc portals.
(2) if you have several funds or if you desire “convenience” then you can switch to the RTA run portal – mfcentral which has recently allowed transactions.