KYC full form is ('Know Your Customer') which refers to the process of identity and addresses verification of all customers and clients by banks, insurance companies and other institutions either before or while they are conducting transactions with their customers. The Reserve Bank of India (RBI) has made KYC mandatory for all banks, financial institutions and any other digital payment companies who carry out financial transactions. Let us take a closer look at what is KYC and the essential KYC documents....Read More
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If you are wondering about what is KYC, then it is an acronym whose full form is 'Know Your Customer.' KYC makes it easier for an institution to authenticate its consumer identity and address details.
Essentially, the meaning of KYC is to establish an individual's identity and address through relevant supporting documents, including photo IDs (for example, PAN card, Aadhar card), In-Person Verification (IPV) and proof of address.
As explained above, KYC compliance is a mandatory exercise under the Prevention of Money Laundering Act, 2002. Furthermore, the Know Your Customer (KYC) process is generally divided into two parts:
KYC completion and updates periodically vary from one account to another, based on the bank's perception of risk. Thus, KYC becomes crucial while performing transactions such as opening bank accounts, making investments in fixed deposits, recurring deposits, mutual fund accounts, and online investments.
Also Read: Best Short Term Investment Plans
KYC become crucial since it helps the banks to ensure that the application received, and all the other details are of a legitimate customer. By ensuring an individual's identity; thus, banks can easily predict and prevent fraud.
KYC information becomes necessary for ensuring that the investments/insurance policy purchases are made by a real person while curbing instances of black money. Hence, the KYC procedure is something that all life insurance and mutual fund investors have to adhere to through a KYC Registration Agency (KRA) as per guidelines laid IRDAI (Insurance Regulatory and Development Authority India) and SEBI (Securities and Exchange Board of India).
KYC is essential for individuals who wish to open a Demat and stock trading account, a bank account, fixed deposit account, purchase life insurance, operate mobile wallets for digital transfer of money and any other financial transactions with a registered body.
Without KYC update, you cannot open or conduct any financial transactions in India.
As per the guidelines issued by the Government of India, some key documents serve as 'Officially Valid Documents (or OVDs) and can be considered for the verification of identity. Even if you have already submitted the KYC documents once to an institution, they may ask again for the documentary proof to periodically update the KYC records. If you are an Indian National, the following are the documents accepted as proof of address and proof of identity for the KYC process :
Once you know what is KYC and when is it necessary, you should be aware of the different types of KYC available in India. Let us take a look at different types of KYC:
Using the Aadhar based KYC, you will be only able to make mutual fund investments of Rs.50000 per year. If you want to invest more than Rs.50000 per financial year, you will be required to complete the offline In-Person KYC as well.
Also Read: What is HRA?
You can do Aadhaar based KYC and offline KYC by following the steps mentioned below:
As mandated by the Reserve Bank of India, completing the KYC process is essential. All financial institutions such as banks and life insurance companies have detailed KYC forms that help capture crucial customer information, including their names, contact numbers, addresses and bank details. Therefore, you must make sure that your KYC process is complete with the concerned financial institution so that you can start using their services without any hassles.
ARN NO: June23/Bg/21AF
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