Sunday, February 1, 2015

Know Your Customer (KYC)

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If you visit to a bank branch to open a bank account, you first need to let them know who you are, and where do you live. Without knowing these information, a bank will not open your account. This process of knowing about you (customer) is Know Your Customer (KYC).

Components
It is obvious now, that KYC process has 2 components -
  1. Identity - Who are you?
  2. Address - Where do you live?
Two more things are necessary - your photograph and your signature / thumb impression (These two are the most important)

Documents
The government has notified 6 documents as 'Officially Valid Documents (OVDs) for the purpose of proving your identity -
  • Passport
  • Driving License
  • Voters' Identity Card
  • PAN Card
  • Aadhaar Card issued by UIDAI
  • NREGA Card
If these documents also contain your address, then no separate proof of address will be required. Otherwise, you need to provide another valid address proof.


Special case -
Suppose, you don't have any of the OVDs specified above to proof your identity. Then can you open an account?
The answer is YES
However, the account opened cannot be a normal account. It will be a limited facility account, termed as 'Small Account'. Limitations such as -
  • Balance at any point of time, shouldn't exceed Rs. 50,000
  • 1 year Total Credit shouldn't exceed Rs. 1,00,000
  • Total withdrawal and transfers shouldn't exceed Rs. 10,000 / month
  • Foreign remittances cannot be credited
Such accounts remain operational initially for a period of 12 months (1 year), and thereafter, for a further 1 year (if the holder can prove that he has applied for any of the OVDs in respective office within 1 year of opening the account).


Situational Question (asked in IBPS, SBI or other banking exams)
If a customer comes to your branch to open an account, but doesn't have any valid documents as proof of identity, then would you open an account for him?

The answer is YES (as you already know now!)
Take his photograph and make him sign or provide thumb impression. And tell him you are opening a 'Small Account' for him (also tell him about the limitations, and the need to submit valid documents within 1 year)
Please note that KYC should be completed within 1 year of opening Small Account, and KYC is mandatory.

Refer - RBI Press Release - Aug, 2014
http://rbi.org.in/scripts/BS_PressReleaseDisplay.aspx?prid=31935


e-KYC
It is electronic KYC. As the term means, here KYC will be done electronically (online). Note that it is possible only (or atleast for now) for those who have valid Aadhaar numbers with them. 

You have to authorize the UIDAI (the issuer of Aadhaar card), by explicit consent, to release your identity / address through biometric authentication to the bank branches (or, business correspondents (BC)).

UIDAI then will transfer your data (that was taken from you when you applied for Aadhar card) to the bank, and KYC will be done electronically.



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Happy learning!

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