Understanding KYC (Know Your Customer)

KYC, or Know Your Customer, is an essential yet straightforward process for opening and maintaining a bank account. It involves banks, financial institutions, and other regulated entities verifying the identity, suitability, and associated risks of maintaining a business relationship with a customer. The primary goal of KYC is to prevent financial crimes, such as money laundering and identity theft.

Types of KYC

1. Aadhaar-based e-KYC: This is a quick, paperless method where customer identity is verified using their Aadhaar number and biometric authentication.

2. In-person Verification (IPV): This involves the customer presenting their documents physically for verification.

3. Video KYC: A modern approach where the KYC process is completed via a live video interaction between the customer and a representative from the financial institution.

KYC Process in India

1. Submission of Documents: Customers must provide Proof of Identity (PoI) and Proof of Address (PoA) documents to their financial institution.

2. Verification: The financial institution authenticates the submitted documents.

3. Due Diligence: Additional information may be collected based on the customer's risk profile.

4. Record Keeping: Institutions are required to maintain KYC documents and transaction records for a specified period.

5. Periodic Updates: Customers must update their KYC information periodically, particularly when personal details change.

Essential Information

• A bank account can be opened with one Proof of Identity and one Proof of Address, along with a recent photograph.

• Documents like the Aadhaar Card, Driving License, Voter Identity Card, Passport, or NREGA card serve as both Proof of Identity and Proof of Address.

• The PAN Card serves solely as Proof of Identity.

• If your current address differs from the one on the submitted proof, a simple declaration of your new address suffices.

• Even without proof of identity and address, you can open a "small account" by submitting a recent photograph and signature. This allows an account balance of up to Rs 50,000, withdrawals up to Rs 10,000 per month, and total credits up to Rs 1 lakh per financial year.

• Banks need to reconfirm KYC details every 2, 8, or 10 years, depending on your risk profile.

*The information in this document has been adapted from articles and posters available on https://www.rbi.org.in/FinancialEducation/Home.aspx The original articles can be accessed directly for more comprehensive insights.