What are KYC and eKYC and Why are these Important?

What are KYC and eKYC

According to Anti Money Laundering Basel Index 2017, India is ranked 88th out of a whole 146 countries worldwide with an economic crime risk count of 5.58. With risk count of 4.81 and 4.85, UK and USA got 118th and 116th rank, respectively. The risk count ranges between 0-10, with 10 being the highest risk score.

Now, to regulate money laundering or other types of financial crime, the Reserve Bank of India made KYC documentation mandatory for every financial institution in 2002. This process helps the government to track all financial transactions and bring down corrupt activities. This is an effective way to protect the countrymen from financial risks.

Hence, Know Your Customer norms are important as well as compulsory to follow before any financial transaction.

Here are more details about this methodical practice –

What are KYC and eKYC?

KYC is a compulsory process that is done by every financial organization to authenticate the identity of consumers – their personal data, intention, and background. To make any financial transaction – from account opening to investment – this is the first step that needs to be completed. Nowadays, you can be Know Your Customer-complaint with paperless online verification that is called eKYC.

Moreover, to avail of a loan from the market such as credit card, personal loan or business loan, etc. you also need to complete this process.

KYC Required documents

To complete the process, you need to submit two sets of documents-

1. Proof of identification.
   • Aadhaar card,
   • Voter ID card,
   • Driving license,
   • Passport,
   • Bank photo passbook,
   • PAN card.
2. Proof of residence: Most of the above-said identification proofs are also residential proof. If your ID proof doesn’t include your address (such as PAN), you can submit any of the following documents for KYC as proof of your address.
   • Landline bill,
   • Post-paid mobile bill,
   • Gas bill,
   • Electricity bill,
   • Bank passbook,
   • Credit card bill,
   • Ration card,
   • Legal rental agreement,
   • The recent statement of your Demat account.
3. PAN: You can submit any of the aforesaid KYC documents to avail of financial products like the Bajaj Finserv RBL Bank SuperCard.

KYC application procedures

In India, SEBI brought consistency in Know Your Customer process within registered intermediaries. These intermediaries are – Know Your Customer Registration Agency or KRA, KDMS, CAMS, and NSE and all financial organizations.

Following are the options to avail this process-

1. Offline: In the offline process, you need to collect the Know Your Customer form from the financial institution or relevant intermediaries whom you are opting for financial transactions. Next, along with photocopies of your relevant documents you also need to submit your photo in passport size.
2. Biometric on the basis of Aadhaar: Aadhaar based biometric is the newest way to validate your data. You can opt for it by asking the financial house to collect your details to map down and match with the Aadhaar database. On matching both the data, your details will be retrieved and the KYC process will be completed hassle-free and paper-free.

You can obtain your KYC documents by consulting with the above methods. Possessing genuine KYC helps to reduce identity theft and related fraudulent activities. Hence, completing your KYC application is among top ways how you can avoid credit card fraud.

Financial institutions and NBFCs require individuals to provide KYC documents for verification purposes for the approval of credit card applications and other financial products. Not being able to provide valid KYC documents, is one of the main reasons why you may have been declined a credit card.

Lastly, KYC documentation may take a little time from you but it is important to supervise and decrease the financial risk in the country.