What is KYC in banking and why is it so important?

Banks use the KYC process to verify your identity and safeguard themselves and their customers from scammers.
 

Digital advancements have made our lives easier. From making payments with one click to trading the capital markets with ease, digital tools have changed our lives for good. However, some issues like scams and identity thefts often hamper the seamless digital experience and even lead to financial loss. The latter has historically been a concern for banks and financial institutions.

The introduction of Know Your Customer (KYC) has helped ease some of these issues, safeguarding banks and their users from scammers.

What is KYC?
 

KYC is a tool used by different entities, including banks, to identify users. When you sign up to provide your KYC details to a bank, they will get access to your Aadhaar card details, including your biometric information. If your KYC details match with the one in official government records, your identity is verified.

How does KYC work?
 

An Aadhaar card is used to verify your KYC details. An OTP is sent to the mobile number registered with Aadhaar once you enter your Aadhaar information. You can enter this OTP to help banks access your KYC information.

When is KYC required?
 

KYC is necessary when you do the following:

Open a new bank account
 

When you open a new bank account, the bank would want to verify your identity. Banks want reliable customers, so knowing your identity can help them access your financial records and decide whether you make a good fit. Hence, KYC is required when you open a bank account. You can complete the KYC verification and check your KYC status online.

Applying for a loan or a credit card
 

Giving you a loan or a credit card can be risky for banks. Hence, checking your details thoroughly is necessary. Banks use KYC for this purpose. KYC verification can also help rule out identity theft.

For investments
 

If you invest your money in mutual funds or similar assets, you will need to complete your KYC with the fund house or the broker. KYC helps with the process of redeeming a mutual fund.

To check PAN KYC status
 

The government has made it mandatory to link your Aadhaar with your PAN card. The aim is to ease the process of confirming the identity. You can complete the process online. Once done, the PAN card can be used as a KYC document.

How to check KYC status online?
 

You can check your PAN KYC status online as well as offline. However, the online process is easier, faster, and more user-friendly. You must simply visit CDSL’s (Central Depository Service Limited) website and check the status there using your PAN card number or date of birth.

KYC is essential to avail of any services today. IDFC FIRST Bank needs KYC documents to allow users access to its products and services. As a step ahead, IDFC FIRST Bank has made the process more convenient by introducing digital KYC verification for various applications.

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.