What is KYC? – Know all about KYC & its Types

KYC is one of the important criteria to identify and verify customer addresses in financial institutions. We use KYC on different occasions in our banking and financial processes. But many people may not know the KYC full form. KYC means ‘Know Your Customer’. As the name implies, KYC is a process which helps insurance companies, banks etc. to verify and identify addresses of customers during their transactions.

As per the RBI mandate, KYC is compulsory for every financial institution including banks and companies dealing in digital payment for carrying out monetary transactions.

What is KYC all about?

KYC is an abbreviation that stands for ‘Know Your Customer’ and it is used to validate customer information such as address and identity proof during financial transactions. So, KYC uses relevant documents to validate the customer identity. Some of the documents used include Aadhar card, PAN card, and other photo identity as well as address proof and IPV or In-Person Verification.

KYC compliance has been mandated by RBI to prevent the cases of black money and Money Laundering. The process of KYC has two parts:

The first part includes the required KYC information of a customer as suggested by the Central KYC registry called  Uniform KYC.

The second Part known as Additional KYC needs any extra KYC information individually by the financial agency.

When do you need KYC?

Although KYC is obligatory, getting the process of KYC/eKYC done can also help a person in accessing numerous premium products  provided by different companies easily. Thus, KYC is required to improve the transaction process and to hasten transactions.

KYC in Banking

To get the KYC update process done regularly is important in the banking sector depending on the account wise risk perception of banks. KYC is, hence, required at the time of opening an account in a bank or while making any investments etc. With KYC, banks can ensure the legitimacy of the applicant and other details to check fraud cases.

KYC in the Insurance/ Investment sector

In the insurance and investment sector, the KYC updates ensure that the policyholder is genuine and also curbs black money accumulation. Thus, most investors of Life insurance as well as other tools of investment need to stick to KYC mandates. Regarding this, KYC Registration Agency or KRA is a process that Investors have to go through at the time of making an investment. This rule has been laid as per IRDA (Insurance Regulatory and Development Authority) India and SEBI (Securities and Exchange Board of India guidelines).

Individuals need to get their KYC done for any financial transaction such as for opening demat account, opening bank account, purchasing life insurance, digital money transfer etc.  If you do not get your KYC update, you may not get a monetary transaction done in India.

What Documents are Required for KYC update?

The Government of India has set some guidelines which make 6 important documents to be applicable as Officially Valid Documents or OVDs. These OVDs can be used for identity  verification of customers. KYC is done periodically to update records of customers.

Below are some KYC documents needed for the update procedure:

Identity Proof

Unique Identification Number (UID) such as Aadhaar, Voter ID card, Driving license, Passport PAN card Identity card or photo identity issued by government authorities etc., by Government Financial Institutions, Universities and other Professional Bodies etc.

Address Proof

Voters Identity Card, Passport, Registered resident lease/sale agreement, Driving License, Ration Card, Insurance Copy, house maintenance bill etc. Utility bills such as Landline Telephone Bills, Gas bill or Electricity bill of last three months Passbook entries/Bank Account Statements Self-declaration by the high Court/Supreme Court judges Residence proof issued by Legislative Assembly Elected representatives, Gazetted Officer, Notary, Parliament and government departments etc.

Types of KYC in India

Like other KYC details, being aware of various types of KYC applicable in India is also important as mentioned below:

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

The eKYC supports investments like mutual fund of up to INR 50, 000 per annum. However, if the customer wants to invest beyond that amount, they need to get the offline KYC or In-Person KYC verification.

How to get KYC done in India?

Below are the steps to do Online and Offline KYC update:

Online KYC Registration

• Initiate your KYC account by registering at the official portal of the KYC registration Agency by submitting details like your name, address and DOB (date of birth)
• Now, submit your Aadhaar number as well as the registered contact number. Verify the documents with OTP
• Read and accept the terms of declaration for the e-KYC
• Now, upload your e-Aadhaar copy (self-attested) as a final step

Offline KYC 

• First download the KYC form (from bank and insurance company website etc.)
• Now, fill the required details in the form
• Sign the form and submit the copy to the concerned authorities
• Also, submit attested copies of ID proof, address proof, and your photograph (passport size) together with the KYC form