Know Your Customer, KYC meaning is the process of identity verification of customers and clients. According to the guidelines of the Reserve Bank of India, financial institutions operating in India must complete KYC verification before providing services to their new customers.
KYC is performed by financial institutions as a background check. Moreover, it is also done as a precaution against different illegal activities like money laundering, illegal transactions, etc. It helps the government in better tracking of such activities and eliminating them at their roots.
Submitting completing KYC verification can help customers to access the whole range of products that a financial institution has to offer.
Officially Valid Documents (OVDs) for KYC
The Government of India has marked six documents as the OVDs (Officially Valid Documents) for KYC. These documents are –
- Aadhar card,
- Voter ID,
- Driving License,
- NREGA job card.
These documents also contain the address of individuals; thus, they can also double up as the address proof. Apart from the traditional know Your Customer (KYC meaning), the new eKYC has been launched to perform this process online and reduce the hassle.
What is eKYC?
eKYC means performing the KYC electronically with the help of Aadhar. UIDAI (Unique Identification Authority of India), the agency in charge of implementing Aadhar in India, has also initiated this process. The goal of this process is to simplify customer acquisition and processing for financial institutions.
The government’s ‘Digital India’ initiative has also fuelled the promotion of this process. It played a crucial role in helping Indians to open an account and avail loans and credit cards without much hassle.
With consent from applicants, financial institutions can perform instant verification of customers’ ID and address proof along with their gender, date of birth, email, contact number and other details of applicants at the same time.
Benefits of eKYC
eKYC helps to streamline the entire process of gathering customer information, reduce operational cost, and saves time of financial institutions.
Apart from that, its other benefits are –
● Non-repudiable authentication.
● Complaint with the IT Act.
According to the Prevention of Money-Laundering Act, 2002, and Prevention of Money-Laundering (Maintenance of Records) Rules 2005, it is mandatory for financial institutions to gather personal information of their existing and potential clients. However, to initiate the eKYC process, they have to acquire a license form UIDAI.
Upon securing this license, they need to install a secure vault for Aadhar data storage and implement a hardware security module to protect data and stop phishing.
Submitting the required KYC document is mandatory to avail of financial products like a credit card. Financial institutions can decline a credit card application based on incomplete KYC documents submission.
Few NBFCs only ask for minimum documents along with KYC documents to approve credit cards. The Bajaj Finserv RBL Bank SuperCard, is one such credit card that can be availed by only submitting a few documents.
There are several exclusive benefits of SuperCard that other credit cards don’t offer, emergency personal loans without interest for up to 90 days being one of them.
Applicants should arrange all the documents and fulfil the eligibility criteria before applying. Non-compliance with the same is one of the reasons a credit card application was rejected.
Know Your Customer (KYC meaning) was introduced in 2002 by the RBI to tackle the problem of illegal monetary activities. However, the process of securing these documents was time-consuming and tedious for customers. Moreover, the verification process took a while to complete resulting in more delays in opening accounts or availing loans.
To eliminate this red tape, eKYC was launched. This electronic process has revamped the whole KYC process and made it more customer-friendly and time-saving.