What is the meaning of KYC?
It is an acronym, and you can quickly get its sense after knowing KYC full form. It stands for ‘Know Your Customer’; it is a process through which financial institutions like banks, Finance, and insurance companies can procure the information relevant to their customers’ identity and other credentials. It helps against money laundering or fraud and controls funding for terrorist activities.
As per the guidelines of RBI, all financial institutions are mandated to undergo the KYC process for all the customers with whom they are carrying out financial transactions. Now it is on to the customer whether they opt for KYC online verification or KYC offline verification.
The Importance of KYC
KYC is a vital tool that keeps a check over the financial bodies to ensure that none of the financial transactions undergo any illegal activity. Through KYC, a financial institution acquires a right to verify the financial status of the entity as well as authenticate the operating address and other relevant documents and identify the beneficial owners and authorised signatories.
Documents Required for KYC
As per the guidelines of the government of India, certain vital documents served as officially valid documents (OVDs). They are needed for the verification of identity. If you are an Indian citizen, you must present the following documents as your address proof and identity proof.
- Aadhaar card
- Driving licence
- Passport
- Pan card
- Voter ID card issued by the election commission of India.
If the residential address mentioned in the above credentials is not very clear, then you can present your
- Ration card
- Bank statement
- Verified copy of electricity bill
- Verified copy of residence telephone bill.
- Registered lease or license agreement.
Types of KYCs
As discussed above, there are two types of KYCs available in India. They are –
- Aadhaar-based KYC (eKYC) – The online verification process is highly convenient for people with an internet or broadband connection. Under this process, the customer must upload a scanned copy of their Aadhaar card.
- Offline KYC or In-Person Verification. (IPV) KYC – For this type of verification, the customer should visit a KYC Kiosk to confirm their Aadhaar. Another way is to visit a KYC registration agency to send one of their executives to their home to carry out the verification process.
What is centralised KYC?
Centralised KYC (CKYC) – It is also an online process, but your documents will be saved by the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI)
What is the procedure for the Aadhaar-based KYC?
For Aadhar-based KYC you need to create an account on the official website of the registered KYC registration agency. You must fill in all the details, including your name, DOB, and address. Further, it will ask you to enter your Aadhaar card number and mobile number, and you should verify them by entering the OPT. After this, you must accept the consent declaration term for the KYC and then upload a self-attested copy of the e-Aadhaar.
What is the procedure for the offline KYC?
For offline KYC, download the KYC application form from your Bank or from Finance company website or visit the branch to get a physical KYC form. You must sign and submit the form to the relevant authorities along with the attested Xerox copies of ID proof, residence proof, and your passport-size photograph.
What is the procedure of Centralised KYC
For Centralised KYC you must fill and serve the CKYC form online once. Alongside this, you will have to upload copies of essential documents as well. You will receive a unique 14-digit account number upon submitting the vital documents. The (CERSAI) saves the data in their repository online.
What is KYC in the bank? Is it different from the KYC for investment?
People usually need clarification about KYC and its necessity. The question that strikes most in their mind is – What is KYC in the bank? And what is KYC in investment? Are they the same? The answer to these questions is-
The KYC process is similar for all financial institutions, including the bank. In banks, KYC is the initial step while opening any account in the bank. It is also required for investment in fixed deposits, recurring deposits, and mutual funds.
KYC in insurance companies is as essential as in banks. It verifies that the nominee mentioned by the policyholder must receive the policy claim. It also confirms the proper tax compliance on investment and avoids any chance of black money.
Conclusion
KYC is a one-time process that avoids the misuse of financial services. Once you acquire your KYC number, you do not have to repeat the process. It makes it easy to obtain loans, make investments, buy insurance policies, or open a demat account to hold stocks and bonds
