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All you need to know about KYC

  • Highlights

  • KYC prevents illegal activities and misuse of financial and other services

  • You can complete KYC procedures online or offline

  • Use E-KYC for faster and easier KYC verification and process

  • You can use E-KYC to invest in mutual funds or buy insurance

Today, completing your KYC is an essential component of almost every activity right from using mobile wallets or opening a bank account to applying for a loan or buying a SIM card. The use of KYC (Know Your Customer) is essential for every kind of business or service. This is because thoroughly verifying a customer’s identity is essential to prevent illegal activities, identity fraud, money laundering and also prevent financial or other services from being wrongly used. Read on to know more about KYC and what it involves.

The importance of KYC

In order for the government to carefully monitor and prevent financial abuses, identity theft, money laundering and other legal activities, it is essential to confirm the identity of the applicant. This is why the Reserve Bank of India asked all banks to implement the guidelines for KYC of new accounts towards the end of 2002. The RBI then established the KYC norms for existing accounts in 2004. KYC generally means that you provide information regarding your address and identity via common documents.

The KYC process

You can complete your KYC offline or choose to do so online. For instance, if you are opening a savings account or applying for a personal loan, you will need to visit the nearest branch of your preferred financial institution. This way you can submit the necessary documents.

You can also complete your KYC online. Many financial institutions, lenders, and companies have made online KYC available. This adds to your convenience as you can submit the necessary information and upload documents online even if you are not in the vicinity. Additionally, prior to 2012, it was mandatory for you to submit a copy of your PAN Card in order to make an investment of Rs.50,000 or above especially if you are investing in mutual funds. However with KYC there is no need for this anymore, making investing easier.

How to Apply for a Personal Loan using Aadhaar card

Documents used to complete the KYC process

Although the use of Aadhaar has made KYC easier, with some institutions accepting only the Aadhaar Details for KYC, you can also submit other documents. Take a look at the basic and most common documents that you can submit to complete your KYC.

- To verify your identity, submit any of the following documents:
PAN Card
Aadhaar Card
Voter’s ID
Driving License
Ration Card

- To verify your address, you can submit one of these documents
Ration Card
Electricity or LPG bill
Bank Statement

Banks are also known to accept Employer letters as verification of your address.

Updating your KYC online

Many financial institutions have provided customers with an option to update their KYC information online. This can be by submitting and uploading different documents or using the e-KYC method.

Using Aadhaar for E-KYC

With the Aadhaar Card regulations being widely implemented, you can complete your KYC easily using your Aadhaar information whether you are purchasing a new SIM card or investing in mutual funds. An E-KYC is an electronic procedure of KYC that can be done in two ways. You can either sit at home or update your KYC information online or you can complete KYC needs and verification with a bio-metric device.

While updating your KYC from home, you will be required to submit an Aadhaar OTP that will be sent to the mobile number linked to your Aadhaar Card. In the second type of procedure that involves bio-metrics, you will need to visit a center and use your finger impression. Once the impression has been verified, your information linked to your Aadhaar Card is automatically uploaded.

This makes KYC procedures much easier than having various financial institutions personally verifying each document you submit. As a result, your KYC verification is completed faster, cutting down the wait time from approximately 7 days to as little as a few minutes.

You can also use E-KYC to invest in mutual funds and cut down on wasted time to start investing as soon as possible. Furthermore, you can benefit from the CKYC (Central KYC Registry) that was started around August 2016. This system ensures that you do not have to complete KYC procedure multiple times. Instead, you can complete the procedures once with a financial institution that gets your KYC details registered with the central system. If your documents are accepted, you will receive a 14-digit KIN number, which you can to buy insurance, open a demat account, or buy mutual funds across financial institutions. Thus, you do not have to go through KYC procedures again the next time. While you can invest as much as you want with central KYC, you will need to adhere to the Rs.50,000 limit if you have completed your KYC through E-KYC and not C-KYC.

Tracking your KYC status

Did you know you can track your KYC status online? Once you register your KYC details, you will get an SMS and/or email update about registration. Once it is approved, you will be updated. You can also visit the website of any of the KYC registration agencies to track your KYC status.
While KYC was initially started by the United States of America, India has adopted this process to progress in the fight against corruption. So, make sure you complete this process and prevent any misuse of services.

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