KYC (KNOW YOUR CUSTOMER)

What is KYC?

KYC refers to Know Your Customer. KYC is a mandatory process of verifying a customer’s identity and other credentials by financial institutions with the goal of minimizing illegal activities.

Why is KYC important?

KYC is a due-diligence process followed by banks and other financial institutions to establish a customer’s identity and the risks associated with them to protect the customers.

The KYC criteria were first issued in India in 2002 by the Reserve Bank of India (RBI). Its primary goals were to safeguard regulated entities from three dangers: - 

  • Money Laundering
  • Funding terrorism through CFT (Combating of Financing of Terrorism) 
  • Identity theft

The primary objective of KYC is protection against financial fraud and financial safety.

Three types of KYC Processes:

  • Online
  • Offline
  • Aadhar-based Biometric Authentication

Steps for Offline KYC Process:

  • Download the KYC form
  • Enter your credentials, particularly your PAN and Aadhar numbers
  • Visit the nearest KRA (KYC Registration Agency Office)
  • Submission of form with photo ID and address proof
  • Provide biometrics if required
  • Take note of the application number to track online

While the offline KYC process is simple to follow yet it is long and tedious work to do. Alternatively, Aadhar-based Biometric Authentication is a quicker and smarter process due to online provision with individual conversations.

RBI has established specific norms and guidelines for KYC. Any account opening without KYC is prohibited by RBI (Reserve Bank of India). 

Source - https://www.livemint.com/web-stories/documents-to-be-used-for-kyc-11677487184266.html

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