Capital markets regulator SEBI has mandated mutual fund investors making their mutual fund purchases and redemption through mutual fund house web portals, and fintech apps such as Paytm Money, Registrar, and Transfer agents (RTAs) such as Kfintech / Cams will have to fulfil a crucial step from now onwards. You will be able to make mutual fund purchase or redemption transactions only after you have done Two-factor Authentication (2FA). This blog explains the new process in detail.

What is a Two-Factor Authentication?

Two-factor Authentication involves a second level of security, rather than Single-factor Authentication (SFA) methods in which the user provides only one factor such as the password.
Two-factor Authentication (2FA) is a two-step security process for verification. To proceed with the transaction, investors will have to input the one-time password (OTP) sent to their registered mobile number/ email ID.
This is being done to ensure a higher level of safety for the investors. This secures an investor’s sensitive data and prevents any misuse.

Why has SEBI made 2FA Mandatory for Mutual Fund Transactions

SEBI has made 2FA mandatory for mutual fund transactions to prevent fraud and protect investors. In recent years, there have been instances of unauthorized transactions and fraudulent activities in the mutual fund industry. This has caused concern among investors and eroded their trust in the industry. By making 2FA mandatory, SEBI aims to reduce the risk of such incidents and enhance the security of mutual fund investments.

SEBI notice: https://www.sebi.gov.in/legal/circulars/sep-2022/two-factor-authentication-for-transactions-in-units-of-mutual-funds_63557.html

How Does 2FA Benefit Investors?

Two-factor authentication provides several benefits to investors, including:

Enhanced Security: 2FA adds an extra layer of security to the authentication process, making it more difficult for unauthorized individuals to access an account or perform a transaction.
Reduced Risk of Fraud: By requiring two types of identification, 2FA reduces the risk of fraudulent transactions and protects investors from financial loss.
Increased Trust: The mandatory use of 2FA in mutual fund transactions helps build trust among investors and demonstrates the industry’s commitment to protecting their investments.

What should you do?

The two-factor authentication rule is applicable for all transactions such as lumpsum purchases, SIP registration, switch, redemption, systematic transfer plans, and systematic withdrawal plans. You would just need to verify your transactions via OTP.

How does 2FA flow work on Paytm Money mutual funds?

1. Purchase

Select the amount and type (SIP / Lumpsum) of the transaction on the ‘Scheme Details’ screen.
Post that, a popup will appear asking to enter the OTP sent on email ID and phone number.
You have to enter the OTP that you received on the email id/phone number mentioned in the popup and that’s it. Two-factor authentication is done!

Disclaimer – The securities are quoted as an example and not as a recommendation

2. Redemption

Select the amount you want to redeem from the portfolio of the scheme.
Post that, a popup asking to enter OTP sent on email ID and phone number will appear.
You have to enter the OTP that you received on the email id/phone number mentioned in the popup and that’s it. Two-factor authentication is done!

Some Frequently Asked Questions-

1. How do I update my contact details?

You can update your phone number and email address across your folios through RTAs websites like CAMS and Karvy (KFintech). Find out which RTA your investments fall under by clicking here.

If you already use the same email address and phone number for all your folios, you do not need to update your details.

2. On which email & phone number will I get the OTP to validate my purchase transactions?

If you are investing in a particular AMC for the first time on Paytm money (new folio), you will get the OTP on your Email ID/phone number registered with us in the KYC.
If you are investing in an existing folio, you will get the OTP on the email ID/phone number registered in the RTA records for that folio. This could be different from your KYC / Paytm money login mobile number.

You have to do 2-factor authentication using that OTP while making a purchase and redeeming money.

Conclusion

SEBI’s decision to make 2FA mandatory for mutual fund transactions is a positive step towards enhancing the security of mutual fund investments and protecting investors. Although it adds an extra step to the transaction journey, Two-factor authentication provides an extra layer of security and helps reduce the risk of fraud. As an investor, it is important to follow the 2FA guidelines and take advantage of this enhanced security measure.

Disclaimer – Investments in the securities market are subject to market risks, read all the related documents carefully before investing. This content is purely for information purpose only and in no way to be considered as an advice or recommendation. Paytm Money Ltd SEBI Reg No. Broking – INZ000240532, Depository Participant – IN – DP – 416 – 2019, Depository Participant Number: CDSL – 12088800, NSE (90165), BSE (6707) Regd Office: 136, 1st Floor, Devika Tower, Nehru Place, Delhi – 110019. For complete Terms & Conditions and Disclaimers visit: https://www.paytmmoney.com/stocks/policies/terms