Banking Notes : Know Your Customer (KYC)

• KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers.
• This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts.
• Banks are also required to periodically update their customers’ KYC details.
• KYC guidelines were introduced in year 2002 by RBI and all banks were asked to make all accounts KYC compliant by 31 December 2005.
• These guidelines are issued under Section 35 A of the Banking Regulation Act, 1949.

KYC documents:

These are the documents used to establish customer’s identity. Banks need two types of document one for identity another for address along with a recent photograph.

‘Officially Valid Documents’ (OVDs)

The Government of India has notified six documents as ‘Officially Valid Documents’ (OVDs) for the purpose of producing proof of identity. These are Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhaar Card and NREGA Job Card. If the document submitted by you for proof of identity does not contain address details, then you will have to submit another officially valid document which contains address details.

e-KYC

e-KYC refers to electronic KYC. e-KYC is possible only for those who have Aadhaar numbers. While using e-KYC service, you have to authorise the Unique Identification Authority of India (UIDAI), by explicit consent, to release your identity/address through biometric authentication to the bank branches/business correspondent (BC).

The UIDAI then transfers your data comprising your name, age, gender, and photograph electronically to the bank.

Information thus provided through e-KYC process is permitted to be treated as an ‘Officially Valid Document’ under PML(Prevention of Money Laundering) Rules and is a valid process for KYC verification.

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