MUMBAI, May 20 -- The mutual fund industry may be closing in on a structural fix to a long-running cost problem that weighs on asset manager profitability and makes small investments less viable.

The industry is working on creating its own KYC Registration Agency (KRA) through Mutual Fund Utility (MFU), a move that could cut know-your-customer (KYC) expenses by nearly half, according to four people aware of the discussions.

If implemented, the shift would directly reduce fixed onboarding costs that AMCs must pay for every new investor, regardless of investment size, these people said.

Currently, asset management companies (AMCs) pay around Rs.35 to KRA agencies for every new investor onboarded. That cost applies even to very small inve...