"Know Your Customer" or KYC is an important term used by businesses and refers to the process of verification of the identity of the customers and clients either before or during the start of doing business with them. Banks, digital payment companies or any kind of financial institutions are now required by the RBI norms to have their customers KYC process completed before allowing them complete access to all services.
KYC is done as a precaution against illegal activities like money laundering, bribery or corruption. It helps the government and businesses keep track of such activities or suspect them beforehand. Apart from being a legal requirement, completing the procedure will also help you gain access to many of the financial company's premium products and get transactions done faster.
The Government of India has notified six documents as 'Officially Valid Documents (OVDs) for the purpose of producing proof of identity.
Even when you already submit the KYC documents once, the banks can ask again as they are required to periodically update KYC records.
This is a part of their ongoing due diligence on bank accounts. The periodicity of such updation would vary from account to account or categories of accounts depending on the bank's perception of risk.
Opening bank account, mutual fund account, bank locker, online investing in the mutual fund or gold your KYC should be updated with bank.
Here is a list of documents that can be submitted as proof of identity and address
- Driving Licence
- Voters' Identity Card
- PAN Card
- Aadhaar Card issued by UIDAI
- NREGA Card
- Letter from the National Population Register containing details of name and address
You need to submit any one of these documents as proof of identity. If these documents also contain your address details, then it would be accepted as 'proof of address'.
If the identification information and address which are linking to the Aadhaar number or any other document submitted by the customer for proof of address(POA) or proof of identity(POI) both does not have a current address, one of the following documents must be submitted.
- Utility bill dated less than two months from any service provider (electricity, telephone, postpaid cell phone, gas pipeline, water bill).
- The address copy of an employer which is issued by the state government or central government departments, statutory or regulatory bodies, public sector companies, regular commercial banks, financial institutions and listed companies and leave and license agreements with these employers allocating official accommodation.
- Bank account statement received by mail or courier along with signature verification by the Banker
- Ration card
- Letter from employer, bank manager of scheduled commercial banks.
- A land receipt or municipal tax.
- Monthly pension payment orders which are issued for the retired employees after completion of their retirement age from ministries or public sector companies, if they contain the address.
Many banks and financial institutions ask individuals to self attest before submitting and it should be accompanied by the original documents for verification. If needed it should be property attested by entities authorized for attesting documents.
Notary public, gazetted officer, manager of scheduled commercial/co-operative bank along with name date and seal.
Why Is KYC Important?
KYC is important because it helps the banker to ensure that the application and other details are real. There have been instances of fraud and siphoning off of money from accounts. By ensuring the identity of individuals, it would help to prevent fraud. The Know Your Customer practice has been in vogue for many years now. It is a must and all individuals have to comply, if they wish to open account. It is not possible to open a back account or account for mutual funds without KYC compliance.
Who needs KYC?
Those who want to open a bank account, a demat and stock trading account, open FD in another bank, would definitely need to comply with KYC requirements. You can not open any of the accounts without the Know Your Customer Documents. In fact, it is now mandatory as per guidelines from the Securities and Exchange Board of India to comply with these KYC norms before you open a demat and trading account. Banks too will not open an account unless you have the same.