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What is KYC: All You Need to Know

Know KYC meaning and why it is essential.

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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.

KYC Meaning Max Life Insurance

KYC Meaning Max Life Insurance

KYC Meaning

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[1]:

  • Part I comprises the necessary KYC details of an individual as recommended by the Central KYC registry (this is known as Uniform KYC)
  • Part II, wherein any additional KYC information is sought separately by the financial intermediary (this is known as Additional KYC)

When is KYC Required

Once you have understood KYC meaning and its relevance, it is essential for you to be aware about when KYC is required. While KYC is legally binding, completing the KYC/ eKYC process also helps customers gain access to the different premium products offered by the finance company and also get transactions done faster.

  • KYC For Banks

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 For Investments/Life Insurance

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). 

What is KYC Max Life Insurance

  • KYC For Investments/Life Insurance

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). 

What is KYC Max Life Insurance

Kyc full form

Kyc full form

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.

What are included in KYC Documents?

As per the guidelines issued by the Government of India, 6 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. Following are the Documents Required for the KYC process:

Proof of Identity

These include:

  • Unique Identification Number (UID) such as Aadhaar, Passport, Driving license and Voter ID card
  • PAN card
  • Identity card or document with your photo, which is issued by any Statutory/Regulatory Authorities, Central/State Government and their Departments
  • Identity cards issued by Scheduled Commercial Banks, Public Sector Undertakings, and Public Financial Institutions
  • Identity cards issued by Colleges, which are affiliated to Universities, Professional Bodies including ICAI, ICWAI, ICSI, and Bar Council to their Members
     

Proof of Address

  • Passport, Voters Identity Card, Registered Sale or Lease Agreement of Residence, Ration Card, Driving License, Insurance Copy or Flat Maintenance bill
  • Utility bills such as Landline Telephone Bills, Gas bill or Electricity bill (not more than three months old)
  • Bank Account Statement or Passbook entries (not more than three months old)
  • Self-declaration by the Supreme Court and High Court judges, which specify their new address
  • Proof of residence issued by any of the following bodies:

a. Bank Managers of Scheduled Commercial Banks

b. Multinational Foreign Banks

c. Scheduled Co-Operative Bank

d. Elected representatives to the Legislative Assembly

e. Gazetted Officer

f. Notary public

g. Parliament

h. Documents issued by any Government or Statutory Authority

i. Identity card or documents with an address that are issued by the Central or State Government and their Departments, Statutory or Regulatory Authorities, Scheduled Commercial Banks, Public Sector Undertakings, Public Financial Institutions, and Colleges affiliated to Professional Bodies such as ICAI, ICWAI, Bar Council and ICSI to their Members

Also Read: What is HRA?

What is KYC - KYC full form Max Life Insurance

h. Documents issued by any Government or Statutory Authority

i. Identity card or documents with an address that are issued by the Central or State Government and their Departments, Statutory or Regulatory Authorities, Scheduled Commercial Banks, Public Sector Undertakings, Public Financial Institutions, and Colleges affiliated to Professional Bodies such as ICAI, ICWAI, Bar Council and ICSI to their Members

Also Read: What is HRA?

What is KYC - KYC full form Max Life Insurance

What are the Types of KYC?

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:

  • Aadhaar based KYC (eKYC)
  • Offline KYC or In-Person-Verification (IPV) 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.

What is kyc

What is kyc

How to do KYC in India?

You can do Aadhaar based KYC and offline KYC by following the steps mentioned below:

How to do Aadhaar based KYC or Online KYC?

  • Create your account on, the registered KYC registration Agency's official website and fill in your details such as name, date of birth and address
  • Provide your Aadhaar card number, registered mobile number and verify them using OTP
  • Upload a self-attested copy of e-Aadhaar after accepting the consent declaration terms for the e-KYC

How to do KYC Offline?

  • You can download the KYC application form from your insurance company or bank and fill in your details
  • Sign and submit a physical copy of the KYC form to the relevant authorities
  • Attach the attested photocopies of residence proof, ID proof, and your passport size photograph with the KYC form

Get Your KYC Done Today to Manage Your Finances Efficiently

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. 

Sources:

[1]https://www.mutualfundssahihai.com/en/What-is-KYC

https://www.goodreturns.in/classroom/2016/01/what-is-kyc-what-are-the-documents-required-kyc/articlecontent-pf9460-422032.html

https://www.paisabazaar.com/aadhar-card/what-is-kyc/

https://vikaspedia.in/social-welfare/financial-inclusion/know-your-customer-guidelines

https://www.irdai.gov.in/ADMINCMS/cms/NormalData_Layout.aspx?page=PageNo2061

Disclaimer:

You can save 46800 on taxes if the premium amount is Rs.1.5 lakh per annum and you are:

  • Regular Individual
  • Fall under 30% income tax slab having taxable income less than Rs. 50 lakh
  • Opt for Old tax regime

ARN:- Oct/Bg/28A

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