Know Your Customer (KYC)
KYC refers to ‘Know Your Customer’. This is a policy which has been developed nationwide in order to prevent financial frauds, identity theft and terrorist financing. The main aim of Know Your Customer policy is to help the banks to know their customers in a better way, thereby helping them to manage the risks efficiently.
Know Your Customer policies are designed based on the Reserve Bank of India’s directed key elements. KYC is hence a legal requirement. KYC process involves identifying and verifying the customers on the basis of independent information.
When is KYC required?
The bank or the financial institution needs to adhere to the KYC procedure in the situations like:
- When a customer opens a new account.
- When a customer applies for a loan or a credit card.
- When a customer applies for a locker facility.
- When there arises a need for additional information of an existing customer.
- When the existing documents/information of a existing/new customer are not sufficient.
Customers are required to provide their original documents to the bank for verification and submit the copy of the same for bank’s record. If the customer fails to provide required information to the bank under KYC policy, the bank has the right to close his/her account by issuing a notice, mentioning the reason of doing so.
KYC Requirements
In order to open an account in a bank in India, you need to submit ‘proof of identity and proof of address’ along with a “Recent Photograph”.
Anyone of the following document can be submitted for ‘Proof of identity’
- Passport
- Driving Licence
- Voter Identity Card
- PAN Card
- Aadhaar Card
- NREGA Card
If the above document contains your address, then it can be used as ‘Proof of address’, else you need to submit another official document which contains your address.
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This system is essential so that banks - and other institutions - don’t become victims of fraud. When you open an account, it might be bothersome to provide all this information, but ultimately it protects you. Banks need to insure against fraud and theft, and by making sure you are actually YOU, your investments, cash and deposits are safe.