New Delhi, Oct. 27 -- India's markets regulator has proposed tighter know-your-customer (KYC) checks for mutual fund investors, but stopped short of creating a single centralized verification system-something the industry has long sought for seamless onboarding across the country's financial platforms.

In the draft rules, released on Thursday, the Securities and Exchange Board of India (Sebi) said fund houses can accept a first-time investment or open a new folio only after an investor's KYC is fully verified and marked "compliant" by the KYC Registration Agency (KRA), a move to prevent rising cases of unclaimed dividends and blocked redemptions and to improve compliance among mutual funds in the country.

But the absence of interoperabi...