The details which you fill are almost the same but the format is different. So, what is the point in filling the same details again and again? Can’t there be a central repository for storing and referring such data? Thankfully SEBI has come up with new guidelines for data handling of KYC from Jan 2012 onwards.
Let’s find out what the new features are and how it’s going to be useful for investors.
What is KYC?
Know your customer (KYC) is a process where financial institutions carry out due diligence of their prospective clients so as to identify them uniquely and store relevant information pertinent to doing financial business with them.
Old KYC Process
Whenever clients approached a financial institution so as to start new relationship with them he has to fill the KYC document. If he is dealing with five different institutions, he has to fill the same information five times making the process repetitive and inefficient.
New KYC Guidelines by SEBI
As per the new guidelines by SEBI there is no need to fill the KYC data more than once. Once this data is validated and stored in a central repository any financial institution registered with the repository can access the KYC data of a particular individual. So at the beginning of new relationship with a financial institution there is no need to fill the KYC form again.
The important points of the ruling are listed below:
1. Standard KYC form from Jan2012
2. Setting up of KYC regulatory body (KRA) which will be responsible for interconnectivity between different financial institutions for reference and validation of KYC data
3. KRA will be responsible for KYC process at the first account opening stage
4. Once KRA data for a client is approved it can be used as valid KYC data by different registered agencies for account opening process
Benefits of New Guidelines
The best part of new guideline is removal of duplication of effort. As the KYC will be filled only once from now onwards clients and financial institutions will both save quite a bit of processing time. Possibility of contradictory data is also ruled out as everybody will be referring to the same repository for the KYC data. By implementation of new procedure modification of existing data will also get quite easier.
For example you need not inform each and every agency regarding change of your telephone number. You only need to get the modification done at the central repository and the change will be reflected in each and every financial institution. Together with this financial institutions will be in a position to reduce a lot of paperwork and storage space is order to save KYC data.
No doubt it’s an appreciable effort from SEBI but we will have to wait and watch how smooth and fast the whole process will be implemented. Let’s hope there will be no glitches in the setup of KRA and the process they implement for validation of KYC data.