What is KYC and Why KYC?
With the rise of online banking and digital transactions, keeping your money safe is more important than ever. KYC, or Know Your Customer, plays a key role in this. KYC is a straightforward process that helps banks confirm your identity, ensuring your money is secure and reducing the risk of fraud. It involves collecting and validating essential information, such as government-issued IDs and proof of address, to ensure that customers are who they claim to be.
The primary purpose of KYC is to prevent financial crimes like money laundering, fraud, and terrorist financing. By making KYC mandatory, financial institutions can better protect the integrity of the financial system, enhance transparency, and build trust with their customers. Effective KYC involves verifying a customer’s identity, evaluating the risk they may pose, and understanding their financial activities.
List of KYC Documents for Indian Citizens:
To complete the KYC process, customers must submit specific documents that verify their identity and address. Here is a list of commonly accepted KYC documents:
- Proof of Identity (POI)
- Aadhaar Card
- Passport
- Voter ID Card
- PAN Card
- Driving License
- Any Government-issued Photo ID Card
- Proof of Address (POA)
- Aadhaar Card
- Passport
- Voter ID Card
- Driving License
- Utility Bills (Electricity, Water, Gas) – not older than 2 months
- Statement from Bank Account or Passbook: no more than three months
- Ration Card
- Property Registration Document
- Rent Agreement (with the latest utility bill attached)
Why KYC is mandatory?
In today’s world of instant transactions, knowing who you’re doing business with is crucial. KYC is the financial industry’s safety net, ensuring trust and preventing financial crimes. It’s like checking someone’s ID before handing over your valuables.
- Prevents Illegal Activities: Helps stop money laundering, fraud, and terrorism financing.
- Ensures Compliance: Meets legal requirements, such as AML laws, to avoid penalties.
- Enhances Security: Verifies customer identities to protect the financial system.
- Builds Trust: Strengthens customer confidence in financial institutions.
- Promotes Transparency: Ensures that only legitimate users access financial services.
Different Types of KYC
Online KYC (eKYC)
- Description: Just go to the KRA’s (KYC Registration Agency) official website.
- Process: Customers upload documents online, use OTP-based authentication, and may undergo video or biometric verification.
- Usage: Common in digital banking, fintech, and online services for quick onboarding.
In-Person KYC (IPV)
- Description: You have to physically visit the KRA office that is nearest to you
- Process: Customers present original documents, which are verified by an authorized representative.
- Usage: Used in traditional banking, high-value transactions, and regions requiring physical verification.
The process for sending the necessary documents to KYC registration agency:
To submit the documents required for KYC (Know Your Customer) to the KYC Registration Agency (KRA), you typically need to follow these steps:
- Choose Your KRA
- Select a KYC Registration Agency (KRA) authorized by SEBI (Securities and Exchange Board of India) to handle KYC processes. Some popular KRAs include CDSL Ventures, NSDL e-Governance Infrastructure, and Karvy.
- Collect the Required Documents
- Proof of Identity (POI): This can be your PAN card, Aadhaar card, passport, voter ID, driving license, etc.
- Proof of Address (POA): This can be your Aadhaar card, passport, voter ID, utility bill, bank statement, etc.
- Photograph: A recent passport-sized photograph.
- Fill Out the KYC Form
- Obtain the KYC form from the KRA’s website or the financial institution you are dealing with.
- Fill in your personal details, including name, date of birth, address, and contact information.
- Submit the Documents
- Online Submission:
- Visit the KRA’s online portal.
- Scan all important documents.
- Verify the submission using an OTP issued to the email address or registered mobile number you provided.
Offline Submission:
- Visit a branch of the financial institution or the KRA’s office.
- Submit the physical copies of the filled KYC form and the required documents.
- Verification
- The KRA will verify the documents submitted.
- If everything is in order, your KYC status will be updated to “Verified.”
- Track KYC Status
- You can check the status of your KYC application on the KRA’s website by entering your PAN number or another reference ID provided during submission.
- Receiving Confirmation
- Once the KYC is successfully processed, you will receive a confirmation message via SMS or email.
This process ensures that your KYC is registered with the KRA, which can then be used for various financial transactions like opening bank accounts, investing in mutual funds etc.