Kyc A Important Process In Financial Sector

By Author: Shashank Pawar
Total Articles: 13
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If you are wondering what is KYC and why it is essential for your financial goals including mutual funds investment, we can help you. In this article, we discuss the KYC process in detail and explain how you can meet your bank’s or other financial organization’s KYC requirements.

To start, KYC, short for “Know Your Customer”, refers to the procedure used by financial institutions to verify their customers’ identity and address before allowing them to open their account and do business with them. The RBI has mandated that financial organizations need to complete their customers’ KYC process and requirements before giving them full access to their services. KYC helps to prevent illegal activities such as corruption, bribery, or money laundering. Other advantages are you’ll get access to premium products of the financial institution and also complete your transactions faster.

Documents Needed for Know Your Customer
The Indian Government has notified that six official documents can be used for the KYC process to affirm a customer’s identity and address. These are Aadhar card, ...
... PAN card, voter’s identity card, passport, driver’s license, and NREGA card. Sometimes, the bank may ask you to update your KYC records to avail services such as opening a savings or current account, bank locker, mutual funds investment, and online investment in gold or mutual funds.

You are required to submit any of the above documents to confirm your identity. If the document also has your address, then it can be used to confirm your address too. However, if the document does not show your address, then you need to provide another official document such as a copy of the bank passbook, gas bill, electricity bill, telephone bill, or bank account that shows your current address.

Many financial institutions and banks ask customers to self attest the copies before submission and they should also take their original documents to the institution for verification. If needed, the copies should be attested properly by authorized entities such as gazetted officer, notary public, or manager of scheduled co-operative/commercial bank along with the seal, their name, and the date.

Importance of KYC
To meet your financial goals, you need to open a bank and/or mutual fund account. The KYC process helps to prove your identity and address to the bank officials, so you can convince them you are a genuine customer. Plus, banks can prevent fraud and maintain integrity in their operations. The Know Your Customer procedure has been mandatory for numerous years now and has become vital for smooth account opening.

Who Requires KYC?
To open a fixed deposit with a bank, stock trading and Demat account, and also for mutual funds investment as mentioned earlier, KYC is essential. You’ll not be able to avail of any of the above services if you do not submit valid KYC documents. Also, the Securities and Exchange Board of India (SEBI) has mandated that customers should comply with KYC norms before they are allowed to open a trading and Demat account. Banks also insist on completing the KYC process to ensure the customer is authentic.