KYC which is the abbreviation for ‘Know Your Customer’ which is a process through which any financial institution or an organization verifies the identity of its customer. These days, KYC is needed at every step of association with any financial institution. These financial institutions can be anyone be it your stockbrokers, banks, online wallets, mutual funds or investment advisors. Organizations such as these ask for a host of documents from its customers to complete their KYC.
KYC is needed by these financial institutions to mainly verify the identity of their customers. This can be done in the form of asking simple questions such as their date of birth, their PAN number, Aadhar number, name, address etc. This is also done to cross check whether the person / customer is charged or not with corruption or money laundering or terrorist financing etc., which have increasingly become common in the current times.
Origin of KYC
The KYC regulations were initially introduced by the RBI mainly for the banking sector. The KYC policy was introduced as an arm of the Prevention of Money Laundering Act to establish identity of the lenders and borrowers in the banking system and to keep a track of their transactions.
However, eventually, KYC was adopted by all other regulators such as the IRDAI for insurances and by SEBI for broking accounts and investment advisory and by FMC for the trading in commodities markets. Today even wallet apps like Payzapp and Paytm require KYC formalities to be completed.
Documents needed for KYC
While KYC was supposed to make banking and financial transactions easier. However, the hassles of documentation have made the KYC process much difficult for the common man. However, KYC only needs proof of two main details- ID and address. The following are the documents which can be used for the KYC process:
• Driving License
• Voter ID
• Pan Card
• Aadhar card
• Electricity bill
• Gas bill
• Telephone bill
• Bank statement
• Ration card
• Appointment letter
Any of these documents which can establish a person’s identity and address can be used for completing the KYC procedure.
Ways of getting KYC done
There are two ways in which you can get your KYC formalities completed- Online and Offline.
Offline KYC – This requires you to download a form from the Central Depository Services Limited (CDSL) website and submit the same at the physical location where the KYC is required. In this, you need to attach self-attested copies of ID proof, address proof and a passport sized photo.
Online KYC – In this you have to make an account in any KYC Registration Agency (KRA). This will require filling up of all personal details along with the Aadhar registered mobile number. This is verified using an OTP after which you are expected to upload self-attested copy of e-Aadhar.
It is better to have your KYC registered with a KRA sooner or later as the sector of financial services is growing rapidly and with it the chances of you needing a financial asset such as a mutual fund and demat account, insurance etc. While this is a one-time hassle, it is nothing more than just updating your latest residential address and your ID.
For services of investment advisor as well, you require to undergo the KYC process without which your application cannot be processed further.