No KYC in a bank account may be dangerous to account safety.

KYC in a bank

KYC in a bank is one of the most common & fundamental questions among Bank customers & employees. There are lots of misinformation & misunderstanding about the process.

I was no exception to it when I went to the Bank last week to operate the locker. I was denied access on the grounds of non-updation of KYC. Furious, I went to see the Branch Manager & I explained how the executive insisted on checking my ID proofs. I was present there in person & willing to sign; still, what is the need for the ID proofs?

Smiling, she explained that it is essential for us as a Bank to check the ID proof and ascertain your identity. 

She also explained that it is the extra check of following KYC guidelines before giving access to my valuables. KYC in a bank is mandated by the RBI & is in the interest of both the Bank & the account holder. I was convinced & pleased with all the extra caution done by the Bank. 

Curious as I am, a dozen questions were running into my mind, like-

What is KYC?

What is the full form of KYC?

Is KYC compulsory?

Is KYC an RBI norm?

What are all documents there in the RBI KYC document list?

I went ahead with all my curiosity & asked the Branch Manager about my doubts. I wanted to understand how we common people are related & liable for a procedure like this( KYC in a bank) & why it should be important to us?

So here is what she explained to me-

What is KYC?

KYC or know your customers is a process through which a bank or a financial institution verifies the identity and address of an individual.

 KYC is done through obtaining the primary documents such as your identity proof & address proof to operate your Bank account -right from Account opening to Modifications to Closure and, of course, identity verification. 

Before RBI introduced the KYC documents, there was a lot of confusion. Banks were having different guidelines on what documents to accept & what not to consider as basic KYC (Know Your Customer).

With the introduction of Officially valid documents, RBI had tried to standardize the process; still, the discretion to accept or deny it lies with the Banks.

So which all documents are Officially Valid Documents recognized for account opening & other banking operations?

These six documents are valid RBI KYC Identity proofs-

Driving License

Passport

Voter Card

Pan 

Aadhar

NREGA Card

Any of the above documents are accepted as proof of identity. If they also contain address, they would also be taken as ‘proof of address. Suppose the document submitted by you for proof of identity does not contain address details. In that case, you will have to submit another officially valid document for Know your customer process, which includes address details.

Apart from the documents mentioned above, RBI approves all the below documents as KYC address proof.

  • All utility bills (electricity, postpaid mobile, landline, water bill etc.) which are not older than two months
  • Property or Municipal Tax receipt.
  • Bank Account statement/passbook
  • Pension or family pension orders
  • Letter of accommodation allotment, leave & license agreements from the employer. The employers include State or Central government, statutory or regulatory bodies, PSUs, financial institutions & listed companies.
  • Letter issued by the government department of foreign jurisdictions, Foreign Embassy or Mission in India

We should also keep in mind that it must be self-attested whenever we are submitting any document to the Bank (signed by the document owner).

Another tip is always to carry the original document so that the Bank can verify your documents from the original & you save another trip down there.

These documents are valid for operating your bank accounts and all digital accounts such as wallets & PayPal.

Another question popped my mind-

What if the documents submitted at the Bank are very old & how does the Bank ascertain the identity?

RBI has taken care of that as well.

KYC came into existence in 2002 in India, and RBI, in 2004, made it mandatory for all banks to carry out KYC of customers by December 2005.  

As per the latest mandate from RBI, banks are required to update KYC for their existing customers with a frequency of two years to ten years, depending on their profile.

So my key takeaway was when we get our KYC done, we inform the Bank about our identity, address, and financial history. The process helps banks ensure that the money invested in it is not for money laundering/illegal activities, apart from making sure it belongs to us.

It is done on various levels, initially when we get our account opened, then whenever we operate the account & finally periodic updation of the documents.

As much as we should be aware of our rights & exercise them at the Bank, we also have to get our KYC done as responsible citizens.

In the first two cases, account opening & account operation, we are physically available & hence KYC is done on the spot.

However, for periodic updation, we can either update KYC offline or online.

The banks must not insist on the physical presence of customers for the same. They can either mail the self-attested documents on the Bank’s prescribed email id or can submit a physical KYC form along with self-attested Officially Valid Documents either in person or through the bearer with an authorisation letter.

I was also wondering, during the pandemic, when we are following social distancing & no physical contact, how do Banks following the KYC process?

For Re KYC, the customer can email their documents from the registered email id.

And as far as new accounts are concerned, Banks are doing e-KYC. You need to have an Aadhar number for E-KYC or electronic KYC 

For reiteration, I have answered some FAQs about What is KYC and its purpose?

Frequently Asked Questions (FAQs)

1. Is KYC compulsory?

 Yes, it is compulsory.

2.If I do not have the required KYC documents, can Bank deny opening the account? 

Yes, Bank may deny opening your account

3. Do I have to furnish KYC documents for each account I open in a bank even though I have provided KYC at the time of account opening?

No, KYC submission is required only once during account opening; later on, Bank can refer to your submitted documents.

4. Is KYC mandatory for Credit/Debit/Smart/Sodexo/Gift cards add-on/ supplementary cards.

Yes, KYC is necessary for Credit/Debit/Smart/Sodexo/Gift cards add-on/ supplementary cards.

5. Can I buy the demand draft/traveller’s cheque in cash without submitting KYC?

Yes, for less than 50,0

6.I gave KYC documents at the time of account opening; why banks keep asking them time and again?

As per the RBI guideline, Banks need to update KYC records periodically.

7. What is KYC verified?

“KYC verified” means our identity & address have been verified by the concerned bank/financial institution.

8.How can I do KYC verification at home?

For Re KYC, the customer can email their documents from the registered email id. Also, if there are no changes in the address, we can update through internet banking.

And as far as new accounts are concerned, Banks are doing e-KYC. e-KYC refers to electronic KYC. Aadhaar numbers are mandatory for E-KYC.

Benefits of KYC registration

Regularly updating KYC aims at maintaining transparency in the functioning of the government systems, the benefits of which include:

Prevention of money laundering

Risk management for the customers and authorities

Regular KYC status check for theft and finance terrorism

It was overwhelming & satisfying to know how Banks take extra caution to safeguard our money and the country’s financial security.

They are true financial warriors.

I hope you had liked the article. Your feedback will be deeply appreciated.

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