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FinFIRST Blogs
You cannot avail of any financial service in India without completing the KYC process. But what does it mean and why is it so necessary?
Since 2004, the Reserve Bank of India (RBI) has made it mandatory for financial institutions to verify the identity of all consumers doing any financial transaction with them. The KYC (Know Your Customer) process was set up to simplify this process. It is an efficient approach to speed up authenticating a customer's validity. Today, KYC is an integral part of all banking activities. Here's a definite guide to what it means.
What is KYC?
KYC is a validation method that allows a financial organisation to confirm and verify a customer's authenticity. This authenticity is used to verify the customer's identity and address. Customers are even asked to present KYC evidence before investing in mutual funds, fixed deposits, and bank accounts through a financial platform.
The RBI requires any existing and authorised financial institution, bank, or other organisation that conducts financial transactions to conduct a KYC process for all customers before permitting them to conduct financial transactions.
What is the need for KYC?
KYC is a vital process that proves helpful in the following ways:
1. Prevents money laundering
One of the critical benefits of KYC is that it ensures financial platforms are not utilised for money laundering. Money laundering is frequently carried out without the knowledge of the bank whose system is being used for such purposes. Banks can catch potential money laundering activities with KYC online validation and onsite KYC authentication.
2. Checks the legal validity of a non-individual consumer
Many non-individual consumers utilise financial services such as trading, mutual fund investing, and similar activities. KYC gives banks, financial firms, and brokerage firms, among others, the ability to check an entity's legal standing. It can entail validating the credentials of their beneficial owners and authorised signatories, as well as cross-checking their working address.
KYC, whether that is online or offline, is mandatory to open a Demat account, a trading account, a bank account, and other financial services.
What are the different types of KYC?
There are two types of KYC available: Aadhaar KYC and in-person KYC.
1. Aadhaar KYC
KYC based on Aadhar is a verification system that can be completed online, making it simple for individuals with access to the Internet. For this kind of KYC, one must submit a softcopy of their original Aadhaar card.
2. In-person KYC
If a person desires to invest in mutual funds for a longer time, they will be asked to complete an in-person KYC verification. In contrast to the online verification method, in-person verification KYC is done offline. To do so, the consumer might go to a KYC kiosk or a mutual fund institution and utilise Aadhaar biometrics to verify their identification.
You can also contact the KYC registration agency and request that an executive come to your house or workplace to conduct this verification. Some mutual fund companies also offer in-person mutual fund KYC through video calls, which requires the customer to show their valid Aadhaar card and residence paperwork.
All banks, including IDFC FIRST Bank, require you to submit your KYC when availing of any service. With IDFC FIRST Bank, you can also rest assured that you will receive assistance if there is a problem with your KYC. The bank will ensure that you do not face inconvenience at any point. Furthermore, IDFC FIRST Bank has made most processes online, removing the need for you to visit the bank.
Frequently Asked Questions
When is KYC required?
KYC verification is a requirement for performing various transactions and activities in India. You need to furnish KYC details when opening a bank account or applying for a loan. The same holds true for investing in mutual funds, stocks, or fixed deposits (FDs). Mobile wallets also request KYC information to grant complete access to their services.
In fact, from January 1, 2023, a new rule requires policyholders to present KYC documents to buy any insurance policy. This includes life, general, and health insurance. The rule revolves around better risk assessment, pricing, and cutting down on fake claims.
When is the periodic update for KYC needed? The RBI Master Circular on KYC says you need to update your information at different times based on your risk level. High-risk customers should update every two years. Medium-risk individuals should update every eight years, and low-risk ones every ten years from the last update or account opening.
As you can see, banks require KYC to comply with legal and regulatory obligations. It helps prevent scams, money laundering, and unlawful funding. Note that KYC is an ongoing process. It needs regular updates to maintain the accuracy and confidentiality of clients' personal information.
What is the list of documents required for KYC?
To complete KYC, there are certain documents needed. You will have to submit hard copies or scanned versions, whatever your bank asks for.
Usually, two types of documents are needed, identity and address proof. If the officially valid document (OVD) used for opening a bank account contains both identity and address details, there is no need for additional proof. You can use your driver’s licence, voter ID, passport, Aadhaar letter from UIDAI, or a state signed NREGA Job Card as officially valid documents for KYC.
UIDAI gives you an online option for KYC through its e-KYC service. It contains your name, gender, age, and photo and acts as an officially valid document. You can choose this method if you find it convenient as the e-KYC process can also be considered as an OVD.
Whether you submit physical copies or use e-KYC, it's crucial to comply with your bank's specific KYC documentation requirements to ensure a smooth process.
How to do KYC in India?
You can choose to go with the online or offline method. For the offline method, visit a branch and hand over your documents. If you prefer the online method, stay home or any other location and complete a video call within a few minutes.
The KYC verification process doesn't take much time but it’s crucial to pay careful attention to each step. Keep your original documents handy for verification whether you choose to complete the process online or offline. Some financial institutions may also ask for additional documents, such as your latest photos or bank statements. So, check their prerequisites beforehand.
Also, guidelines can change from time to time, so it is advisable to contact the institution where you are doing your KYC and clear all the doubts. It's better to be prepared than to overlook a key requirement. Now, let's go through the process for both offline and online KYC verification.
What is the step-by-step process for offline KYC verification?
Go to the branch where you want to get your offline KYC done. Bring all the necessary original documents and self-attested photocopies. After that:
- Fill out a KYC form which usually includes basic personal details like name, date of birth, and contact information. Fill it out carefully to avoid any errors that may delay the KYC verification process.
- Attach your passport-sized photo on the form. Now submit it along with the photocopies of your documents.
- Officials will check your papers against the original versions.
- You will get an application number that you can use to track your KYC status.
- Post KYC verification, you will get confirmation via a call, SMS, or email. Keep a copy of your KYC form and any related receipts as a record.
The specific requirements and procedures may vary, so contact the institution beforehand to know their exact offline KYC verification process.
What is the step-by-step process for KYC online verification?
Today, banks have introduced video KYC facilities, which allow customers to complete the verification process from any location. So now you do not have to mandatorily visit the branch physically. Here are the steps to complete a video KYC process:
- First, visit your bank's website and book a slot for a video call. You will get a confirmation, typically as an SMS or email, containing a link to join the video call.
- Click that link when it's time for your scheduled call. A bank official will join you on the video call and guide you through the next steps.
- Show your identity and address proofs to the camera. The official will check if these documents are valid.
- Next, the bank official will take a picture of you which becomes part of your KYC records.
- Finally, the official will review all submitted details and then process your application. You will receive a notification once your KYC gets approved.
Video KYC makes the whole process quick and hassle-free. So, why wait? Complete your KYC today and enjoy seamless banking services.
Disclaimer
The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.
The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.
