What is Two Factor Authentication (2FA) for MF Redemption (SEBI Circular 2022)?

If you invest in mutual funds online, then you need to know this. Because, if you don’t get this done, then many of your mutual fund transactions like redemptions, STP, SWP, etc. will stop working from July 2022 onwards.

Don’t be shocked as it’s only a simple thing that needs to be ensured – you need to have the Two-factor Authentication (2FA) enabled for your mutual funds. As per SEBI, the new rule to mandate the Two-factor Authentication (2FA) is to help increase the security of all mutual fund transactions effective from June 01, 2022.

What is Two-factor Authentication (2FA) in Mutual Funds?

Two-factor Authentication (2FA) is an extra layer which is part of a 2-step security process for verification in which users need to authenticate themselves using an additional factor (like OTP) in addition to the regular password.

How will the 2FA work in Mutual Fund Redemption?

  • Log in to your chosen Mutual fund platform (using a password as the first level of 2FA).
  • Choose the transaction that you want to like redemption, STP, SWP, etc.
  • Now comes the 2nd level of authentication. An OTP will be sent to the investor’s registered mobile number/email ID.
  • Once both factors are provided, only then the MF transaction will be processed.

Most mutual fund houses would have already sent emails to investors informing them about the SEBI’s guidelines for this new requirement of Two-factor Authentication (2FA).

Reminder – It is mandatory to use the two-factor authentication method mandated by SEBI if you want to redeem mutual funds units online.

Do note that if 2FA is not enabled, then your MF transactions (like redemption, switch, STP, SWP) will not be processed. So make sure that your latest mobile number and active email-id are registered/updated against the respective folio numbers with the AMC you are investing with.

I hope now you know what is the Two-factor authentication and OTP requirement for your mutual fund transactions in India (2022) now. So make sure you have your mobile numbers and e-mail IDs up-to-date and registered with the AMCs.

Link – SEBI Circular of Two Factor Authentication (2FA) for mutual funds

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