Lending and borrowing is the process in which lender is always at risk. Most of the risk is from the borrower side. The risk comprises of- whether the person to who is borrowing is genuine? Has he provided his correct identity? Will he be able to repay whatever amount he is borrowing?
We live in a time where identity forgery, signature forgery and phishing is a very common thing. Suppose a man goes to a bank and says his name as X and borrows an amount. What if the details he gave is incorrect? What if he runs away with that amount? It will be the bank, who will have to suffer and bear that loss. So, it is very important for any of the lender whether it is a bank or a NBFC to have a complete and right knowledge of your customers especially when you are a financial organisation or even if you are a businessman it is very important to KNOW YOUR CUSTOMER. Knowing your client plays the most important role to protect your financial institution or Business from fraud and illegal transactions and reduces the risk factor. Because of all these things RBI introduced KYC in the year 2002. This KYC has some guidelines to know a customer in a better and efficient way.
Realizing its importance Banks complete this KYC procedure at the time of opening of a bank account. It is also the duty of bank to keep on updating the KYC of every customer with time.
Basically the KYC steps are taken by the banks and FIs to:
- Get the customer’s identity.
- To know the source of fund of the customer.
- To monitor the customer’s financial activity.
- To minimise the customer based risk.
When KYC is needed?
You need to submit KYC documents for-
- Opening a new bank account.
- While applying for any kind of loan such as personal loan or home loan.
- While applying for a credit card.
- For investing in mutual funds, stock market and any kind of trading.
- For any kind of insurance whether it is a life insurance or car insurance.
- To have locker in the Bank.
In general, common documents required for KYC are:
- Document for Identity proof.
- Document for Address proof.
- Recent photograph.
Acceptable KYC Documents for opening a Bank Account
- Voter’s Identity Card
- Driving Licence
- Aadhaar Letter/Card
- NREGA Card
- PAN Card
Acceptable KYC Documents for a Loan
- Photo Identity Proof
- Residence Address Proof
- Residence Ownership Proof
- Income Proof
- Job Continuity Proof
- Bank Statement
- Investment Proof
- 1 passport size colour photograph
Acceptable KYC Documents for Credit Card
- Pan card
- Driving License
- Voter ID card
- Telephone or electricity bill (not more than 2 months old),
- Bank statement
- Rental agreement
- Ration card
- Last 3 months salary slips
- 6 months bank statement for salary account
- Secondary School Certificate (class X)
- Birth certificate
Acceptable KYC Documents for Investments
- Unique Identification Number (UID) (Aadhaar)
- Driving License
- Voters Identity Card
- Ration Card
- Registered Lease/Sale Agreement of Residence
- Flat Maintenance bill
- Insurance Copy
- Telephone bill (only landline), Electricity bill or Gas bill (not be more than 3 months old)
- Bank Account Statement/Passbook (not more than 3 months old)
- Proof of address
- Proof of Identity
Acceptable KYC Documents for Insurance
- Photographs (Passport-sized)
- Driving License
- PAN Card
- SC Certificate
- Telephone Bill
- Electricity Bill
- Ration Card
- Water Bill
- Voter ID Card
- Pension Pass Book
- Income Tax Returns
- Form 16
- Salary Slips (not more than 3 months old)
Documents which you can give as proof of identity and proof of address
The government of India has listed 6 documents as the officially valid documents (OVDs) for the identity proof. You can submit anyone documents from these for the identity proof, and those documents are- voter ID card, Aadhaar card, Pan Card, Passport, Driving licence, NERGA job cards. Anyone of these documents can also be used for the address proof if they contain address too and if not you will have to submit other document for your address proof.
If you don’t have any of these documents then these documents can also be accepted for KYC – utility bills (electricity bill, water bill, phone bills etc.), Bank statement, and municipal tax bills.
What is eKYC?
An e-KYC is a paperless and imitation verification strategy for online confirmation in view of Aadhaar card. To be more exact, it is, where you approve and allow the KYC procedure to be performed electronically. It has reduced the documents check time essentially. The procedure that used to take weeks sooner would now be able to be finished in a matter of days.
By eKYC you authorize yourself to the unique identification Authority of India (UIDAI) which is done by providing your Aadhaar card no. By doing this you are providing your personal details such as your name, gender, age, address and even your thumb and eye retina impression. So basically Digitalization of KYC which is done by linking your Aadhar card electronically to Banks and other required places.
Benefits of eKYC
- eKYC is basically the Digitalisation of KYC which has undoubtedly reduced the processing time.
- This has reduced the risk of Fraud and Forgeries.
- This has eliminated the paper cost and cost of storage too.
- One of the advantage of eKYC is it provides you benefit to invest in mutual funds instantly.
How to Register for eKYC?
- Visit the genuine online website to start the e-KYC procedure. These website must be the ones upheld by KYC Registration Agencies(KRA)
- Make your portfolio with your email id and fill in the essential subtle elements, and required details including e-Aadhar, Pan Card and your signature copy.
- After you give your Aadhaar number and mobile number, you are explored to Aadhaar verification window where you have to enter the OTP sent to your registered mobile number.
- Post this you have to present your self-verified duplicate of e-Aadhar.
- The last step of the whole procedure includes confirmation and approval from the UIDAI (Unique Identification Authority of India) database, which denotes your eKYC process is completed.